Key Points
- Recent U.S. inflation data was lower than anticipated, impacting Bitcoin’s capacity to sustain gains.
- Market uncertainty remains high due to the U.S. debt refinancing challenge and declining cryptocurrency trading activity.
The most recent inflation data from the U.S. fell short of expectations, which affected Bitcoin’s ability to hold onto its gains. This is particularly due to concerns about the ongoing trade war.
Data released on March 12 showed that the Consumer Price Index for February rose by 2.8%, which is less than the predicted 2.9%. The Core CPI, excluding food and energy, fell to 3.1%, slightly better than the anticipated 3.2%.
Market Response and Bitcoin’s Performance
In response to this information, the market increased bets on cuts to the Federal Reserve rate. The chances of a cut in May rose to 31.4%, a significant increase from last month’s 9%. The likelihood of three cuts by the end of the year jumped to 32.5%, and expectations for four cuts rocketed from 1% to 21%.
Bitcoin briefly exceeded $84,000 before dropping back to $83,000, erasing most of its gains following the CPI release. Despite the softer inflation data, equities failed to maintain early gains, and other financial markets also experienced losses. Analysts attribute ongoing trade tensions as a significant factor in limiting risk appetite.
Trade Tensions and Market Uncertainty
Recently, Canada responded to U.S. tariffs on steel and aluminum by imposing $21 billion in tariffs on U.S. exports. Following this, the European Union imposed additional tariffs on American goods valued at $28 billion. There is increasing worry that these escalating trade disputes could heighten inflationary pressures and complicate the Federal Reserve’s decision-making process.
The Kobeissi Letter suggests that the U.S. will face a $9.2 trillion debt refinancing challenge in 2025. Without lower interest rates, borrowing costs could increase significantly, further straining the national debt, which currently exceeds $36 trillion. As a result, market uncertainty is high, with investors keeping a close eye on both monetary policy and global trade developments.
Cryptocurrency Trading Activity Declines
On-chain data indicates a loss of confidence among cryptocurrency traders. Trading activity across the crypto market has been on a decline since peaking in late February. Over the past two weeks, losses in market capitalization have made traders cautious, with signs of exhaustion and capitulation beginning to appear. Even the bounce in Bitcoin’s price driven by the CPI failed to trigger a significant increase in trading activity.
Typically, this type of volume decline indicates weak market momentum amid minor price recoveries. Without strong buying interest, gains can quickly fade, leaving prices vulnerable to further decreases. Both retail and institutional traders seem to be in a waiting phase, anticipating the other’s move. Until trading volume significantly increases, caution is likely to prevail.
