After reaching highs of nearly $80,000, Bitcoin's price has retreated to $76,500, pausing its rally from the late-March lows below $65,000. However, recent economic data suggests that a swift rebound may not be imminent.
The University of Michigan's Consumer Sentiment Index has dropped to a record low of 49.8, driven largely by inflation concerns linked to the Iran conflict. Inflation expectations have also increased, with the one-year gauge rising to 4.8% in April, up from 3.8% the previous month. Long-term expectations have reached 3.5%, the highest since October 2025. This surge in inflation expectations could limit the Federal Reserve's ability to cut interest rates or ease liquidity in the near term, as it may exacerbate inflationary pressures.
As a result, the Fed's stance may cap upside or slow gains in Bitcoin and other risk assets. Analysts at Bitfinex note that the long-term expectations move is particularly concerning for the Federal Reserve, as it suggests that inflation psychology may be becoming unanchored. The Fed is expected to maintain its benchmark interest rate between 3.5% and 3.75% this Wednesday.
Meanwhile, traders are pricing in a potential Bank of Japan rate increase in June. On the crypto side, sustained ETF inflows are crucial for supporting Bitcoin's price on dips.
Coordinated industry efforts to contain the fallout from the KelpDAO exploit have helped DeFi tokens hold up better than the broader market. The CoinDesk DeFi Select Index gained 0.5% over 24 hours, decoupling from the CoinDesk 20's 1.5% decline. Bitcoin's hourly price swings show that it has broken out of an ascending trendline, and prices are trading at a discount to their 50- and 200-hour averages, indicating uptrend exhaustion and potential for a deeper price pullback.