The latest U.S. inflation data came in lower than expected, but Bitcoin (BTC) failed to sustain gains, as concerns over global trade tensions and economic uncertainty continued to weigh on market sentiment.
US CPI Report Sparks Rate Cut Speculation
On March 12, the U.S. Bureau of Labor Statistics reported that the Consumer Price Index (CPI) for February rose 2.8%, slightly below the 2.9% forecast. Meanwhile, Core CPI, which excludes food and energy costs, dropped to 3.1%, beating the 3.2% estimate.
Markets reacted by increasing bets on Federal Reserve rate cuts:
- 31.4% probability of a rate cut in May, up from 9% last month.
- 32.5% chance of three cuts by year-end.
- Expectations for four cuts surged from 1% to 21%.
Despite this, Bitcoin briefly climbed above $84,000 before retreating to $83,000, wiping out most of its post-CPI gains. Equities also failed to hold onto early gains, signaling wider market uncertainty.
Trade War Fears Weigh on Risk Assets
Analysts point to rising global trade tensions as a key factor limiting risk appetite.
- Canada imposed $21 billion in retaliatory tariffs on U.S. steel and aluminum.
- The European Union followed with $28 billion in tariffs on American goods.
- The escalating trade dispute is raising inflationary pressures, complicating the Federal Reserve’s policy outlook.
Mounting Debt Crisis Adds to Market Uncertainty
According to The Kobeissi Letter, the U.S. faces a $9.2 trillion debt refinancing challenge in 2025. With the national debt exceeding $36 trillion, rising borrowing costs could further strain government finances if interest rates remain high.
Crypto Market Weakens as Trading Volume Declines
On-chain data suggests that crypto traders are growing cautious. Santiment reports that:
- Trading activity has steadily declined since peaking in late February.
- Market-wide losses have left traders hesitant, with signs of capitulation and exhaustion.
- Bitcoin’s CPI-driven bounce failed to trigger sustained buying activity.
“This type of volume decline typically signals weak momentum. Gains can quickly fade in the absence of strong buying interest.” – Santiment
Outlook: A Market in Limbo
Both retail and institutional traders appear to be in a holding pattern, waiting for clearer signals before making moves. Until trading volume picks up significantly, caution is expected to dominate market sentiment, leaving Bitcoin vulnerable to further declines.
