Key Points
- The U.S. CPI report showed a faster than expected cooling of inflation, sparking market expectations for rate cuts.
- Despite inflation cooling, Bitcoin’s price has struggled to maintain momentum due to macroeconomic uncertainty.
The latest U.S. core Consumer Price Index (CPI) report delivered an unexpected surprise, with inflation cooling faster than anticipated.
Core CPI came in at 3.1%, slightly below the projected 3.2%, while headline inflation also saw a minor decline.
Market Reaction to U.S. CPI Shock
As a result of this inflation data, market expectations for rate cuts have surged, with the probability of a May cut jumping to 31.4%, more than tripling from last month.
Similarly, forecasts for three rate cuts by year-end have spiked fivefold to 32.5%, while the likelihood of four cuts has surged from a mere 1% to 21%, signaling a rapid shift in investor sentiment.
Matt Mena, Crypto Research Strategist at 21Shares, commented on the data, suggesting that any rate cuts materializing this year could unleash a flood of liquidity, propelling equities and Bitcoin higher.
Bitcoin’s Struggle Amid Economic Uncertainty
Despite cooling inflation, Bitcoin’s price has struggled to maintain momentum, slipping from over $84,000 to around $83,000 as traders weighed the impact of President Trump’s trade policies and broader macroeconomic uncertainty.
According to the latest data from CoinMarketCap, Bitcoin was trading at $83,030.57, reflecting a modest 0.57% gain in the past 24 hours.
Mena added that with inflation cooling and recession fears still looming but not worsening, Bitcoin could be on the verge of its next major breakout, pushing past the stubborn sub-$90K range.
Federal Reserve officials, including Chairman Jerome Powell and Governor Christopher Waller, have reiterated their cautious stance on rate cuts, signaling no rush to ease policy.
This has sparked concern among analysts, who warn that delaying cuts could trigger a bear market.
Mena further highlighted that the Crypto Fear and Greed Index has plunged to levels not seen since the Terra Luna collapse, reflecting heightened market anxiety.
However, shifting narratives suggest a potential turnaround.
With Jerome Powell recognizing Bitcoin as “digital gold,” analysts see this as a step toward broader acceptance.
Additionally, expectations of interest rate cuts and monetary expansion could provide a much-needed boost to Bitcoin and the broader crypto market, setting the stage for a potential recovery.