Bitcoin (BTC) regained lost ground on Wednesday, climbing to $82,700 after a sharp sell-off earlier this week. The leading cryptocurrency saw a 5.52% recovery after finding support at $78,258, as traders positioned themselves ahead of key US inflation data.
The upcoming Consumer Price Index (CPI) report on Wednesday, followed by the Producer Price Index (PPI) on Thursday, is expected to influence market sentiment, with investors closely watching for signals on future Federal Reserve (Fed) policy moves.
Bitcoin Recovers After Testing Key Support
Bitcoin had briefly slipped below its 200-day Exponential Moving Average (EMA) at $85,664 on Sunday, triggering a sharp 9.14% drop in a single day. The market, however, found strong buying interest at $78,258, leading to a partial rebound.
According to CoinMarketCap data, Bitcoin’s latest surge reflects cautious optimism among investors, but volatility remains high due to macroeconomic uncertainties.
Macroeconomic Uncertainty Weighs on Crypto Sentiment
Despite Bitcoin’s recovery, broader market sentiment remains fragile. Agne Linge, Head of Growth at WeFi, told FXStreet that the crypto market is still in a “risk-on” phase, but investor confidence is tempered by persistent sell-offs since March 3.
Geopolitical tensions, including US trade disputes with China, Mexico, and Canada, have further clouded market outlooks. Bitfinex’s latest report highlights a mixed economic landscape, noting steady job growth and rising wages but also inflationary pressures and cautious business expansion.
Inflation Data Could Shape Fed Rate Expectations
The second US inflation report of 2025 is expected to show a decline in both headline and core CPI for the first time since July 2024. If inflation comes in softer than expected, it could strengthen the case for multiple Fed rate cuts this year—historically a bullish signal for Bitcoin and other risk assets.
However, if inflation remains stubbornly high, the Fed may stick to its restrictive monetary stance, tightening financial conditions and weighing on investor enthusiasm for speculative markets like crypto.
Crypto Traders on High Alert
With inflation data set to play a crucial role in shaping Fed policy expectations, crypto traders are bracing for potential price swings. A dovish outlook from the Fed could reignite bullish momentum in Bitcoin, while persistent inflation risks may push investors toward safer assets like gold.
As the market awaits key economic data, Bitcoin’s ability to sustain its recovery will depend on macroeconomic developments and investor risk appetite in the coming days.
