Bitcoin may continue to decline, as unexpected U.S. inflation numbers have raised concerns that President Trump could adopt a tougher approach on tariffs, which might ultimately lead to an increase in inflation over time.
On Friday, Bitcoin (BTC) fell below $80,000 and remained down about 1.6% within a 24-hour period at the time of reporting. This decrease occurred even as the U.S. Consumer Price Index (CPI) for March indicated inflation had dropped to 2.4%, down from 2.8% in February and slightly better than the anticipated 2.5% from analysts.
The CPI, issued monthly by the U.S. Bureau of Labor Statistics, serves as a crucial measure of inflation and significantly influences the monetary policy decisions made by the Federal Reserve. Typically, lower inflation reduces the necessity for interest rate hikes, which tends to be beneficial for risk assets such as cryptocurrencies and stocks.
However, the positive CPI data did not propel markets upward. The S&P 500 and Nasdaq both opened sharply lower, ending the day down 3.4% and 4.3%, respectively.
The overall cryptocurrency market capitalization also declined by 2.8% in the past 24 hours, indicating that overarching concerns are overshadowing any potential relief brought on by decreasing inflation.
Trump’s trade policies remain a significant worry. On April 9, he introduced a 90-day suspension on planned tariff increases while implementing a 10% reciprocal tariff affecting many countries — notably excluding China, where tariffs on Chinese imports surged to an astonishing 125%, accusing the nation of disregarding global trade standards.
This move temporarily calmed the markets, leading to a brief increase in Bitcoin of over 7%, bringing its value to $82,000, as investors welcomed the short-term alleviation of trade tensions.
Nevertheless, that optimism quickly dissipated following China’s announcement of 84% tariffs on American goods starting April 10. This retaliation reignited fears of a prolonged trade conflict between the U.S. and China, which could adversely impact investor sentiment, especially as the 90-day grace period concludes.
Some analysts warn that the combination of a robust jobs report and easing inflation could actually provide Trump with more political leverage to amplify tariffs, potentially reversing any progress on inflation.
Meanwhile, the chances of the Federal Reserve reducing interest rates in the near future appear to be slim. CME Group’s FedWatch Tool indicates an 81.5% probability that the Fed will maintain current rates at its meeting on May 7. With no anticipated rate cuts until at least June, the macroeconomic environment for Bitcoin remains uncertain.
Capital inflows into Bitcoin have also drastically diminished this year. Analytics platform Glassnode has observed a staggering drop of over 90% in inflows, decreasing from a high of $100 billion to merely around $6 billion. This trend may suggest a waning interest from investors amid the prevailing uncertainty.
Technically, indicators suggest potential further declines. If Bitcoin cannot maintain its $80,000 support level, analysts warn it may test lower support areas, possibly reaching the 356-day exponential moving average around $76,000.
The next critical levels to monitor below this threshold are the active realized price at $71,000, and in a more adverse scenario, the true market mean around $65,000. These zones are significant support areas where long-term investors typically enter. However, if BTC falls below this range, it could suggest more declines are ahead.
Analysts remain optimistic
Still, not all experts perceive Bitcoin’s recent downturn as a weakness. Some analysts claim that Bitcoin is faring remarkably well compared to conventional markets.
Although Bitcoin’s seven-day realized volatility has surged to 83%, it still remains considerably lower than that of the S&P 500, indicating a potential transformation of this digital asset into a low-beta hedge against traditional equities. Over a 30-day period, Bitcoin shows significantly less volatility than the S&P 500.
Furthermore, some on-chain metrics indicate that larger investors are seizing the opportunity to buy amidst the dip.
Data from Santiment reveals that 132 new “shark” wallets, which hold more than 10 BTC, have emerged in the past day.
Additionally, CryptoQuant reports that roughly 48,575 BTC, valued at about $3.6 billion, has shifted into accumulation wallets, marking the highest level of whale activity since 2022, signaling that major holders may be positioning for a long-term strategy despite short-term market hesitance.
While many are still feeling anxious, others are beginning to spot potential signs of a recovery on the charts.
According to one analyst, Bitcoin has recently completed a double bottom pattern, a classic indication of a trend reversal. As it trades above $81,000 and has already rebounded from the $79,900 mark, a potential breakout could be on the horizon, with upside targets approaching $86,000.
If BTC can secure a weekly close above $86,000, some analysts believe it may pave the way for bullish targets around $94,000.
However, without a resolution between the U.S. and China, this ongoing tussle over tariffs will likely continue to exert pressure on the markets.
Note: This article is not intended as investment advice. The content and materials presented are solely for educational purposes.