Bitcoin Braces for Impact as U.S. Inflation Cools and Tariff Tensions Heat Up

Hang onto your hats, crypto fans! Bitcoin might be in for a wild ride as cooler-than-expected U.S. inflation numbers are stoking fears that President Trump could crank up the heat on tariffs. And guess what? That could send inflation soaring right back up in the long run.

Just this past Friday, Bitcoin (BTC) plummeted below the $80,000 mark and was still down around 1.6% in the last 24 hours as we went to press. This drop came despite the U.S. Consumer Price Index (CPI) for March showing inflation cooling to 2.4%, down from 2.8% in February and even better than the 2.5% that analysts had predicted.

The CPI, which the U.S. Bureau of Labor Statistics drops every month, is a major indicator of inflation and plays a big role in shaping the Federal Reserve's monetary policy moves. Usually, when inflation drops, there's less pressure for rate hikes, which is good news for risk assets like crypto and stocks.

But hold up—despite the positive CPI numbers, the markets didn't pop off. The S&P 500 and Nasdaq both tanked at the open and ended the day down by 3.4% and 4.3%, respectively.

And it's not just traditional markets feeling the heat. The total crypto market cap took a 2.8% hit over the past 24 hours, hinting that bigger worries are overshadowing any relief from the cooling inflation.

What's everyone really worried about? Trump's trade policies. On April 9, the President hit the pause button on planned tariff hikes for 90 days and slapped a 10% reciprocal tariff on most countries—except China. For Beijing, he jacked up tariffs on Chinese imports to a whopping 125%, claiming they're not playing by global trade rules.

This move briefly soothed the markets, sending Bitcoin soaring over 7% to hit $82,000 as investors breathed a sigh of relief over the temporary easing of trade tensions.

But that relief was short-lived. China clapped back with 84% tariffs on U.S. goods starting April 10, reigniting fears of a drawn-out U.S.-China trade war. And with that 90-day window ticking down, investor confidence could take another hit.

Experts at The Kobeissi Letter are sounding the alarm, saying that the combo of a solid jobs report and cooling inflation could give Trump more ammo to ramp up tariffs even further, potentially wiping out the progress made on inflation.

Meanwhile, the chances of the Federal Reserve slashing interest rates anytime soon? Slim to none. According to CME Group's FedWatch Tool, there's an 81.5% chance the Fed will keep rates steady at their May 7 meeting. And with no rate cuts expected until at least June, the macro scene remains a wild card for Bitcoin.

Cash flowing into Bitcoin has also hit the brakes hard this year. Analytics gurus at Glassnode have flagged that inflows have nosedived over 90% from a peak of $100 billion down to just around $6 billion. This usually means investor interest is cooling off thanks to all the uncertainty.

And the technical indicators aren't looking too hot either. If Bitcoin can't hold onto the $80,000 level, Glassnode analysts are warning it could crash back down to lower support zones, possibly even the 356-day exponential moving average at $76k.

Keep an eye on those key levels below $80k—the active realized price at $71,000, and if things get really ugly, the true market mean near $65,000. These are big support zones where long-term holders usually step in. But if BTC drops below this range, buckle up for more potential downside.

Analysts remain hopeful

But wait, it's not all doom and gloom for Bitcoin. Some analysts are saying the recent pullback isn't a sign of weakness. In fact, they argue that Bitcoin is holding up pretty darn well compared to traditional markets.

While Bitcoin's seven-day realized volatility has doubled to 83%, it's still way lower than the S&P 500's, hinting that the asset might be evolving into a low-beta hedge against traditional equities. Over a 30-day span, Bitcoin is looking notably less volatile than the S&P 500.

And get this—some on-chain data suggests that the big dogs are buying the dip.

According to Santiment, a whopping 132 new "shark" wallets, those holding more than 10 BTC, have popped up in the last 24 hours.

Data from CryptoQuant shows that around 48,575 BTC, worth roughly $3.6 billion, has moved into accumulation wallets. That's the biggest whale activity we've seen since 2022, which could mean that the major players are setting up for a longer-term play, even as short-term uncertainty lingers.

And while many are still on edge, some are starting to spot signs of a potential recovery on the charts.

Merlijn The Trader is calling it—Bitcoin just wrapped up a double bottom pattern, which is a classic sign of a trend reversal. Now trading above $81k and having bounced off the $79,900 level, a potential breakout could be on the horizon with upside targets around $86K.

If BTC can manage a weekly close above $86k, some analysts believe it could pave the way for the bulls to charge towards $94k. Check it out:

$BTC update: (Macro)

More confirmation with recent PA to validate the macro chart.

1. Any Weekly close below 78k= 4D OB
2. Any Weekly close above 86k= 94k

The 78-86k range can both be 'Anger' or 'Late Anxiety' phase. The macroeconomic data and global changes can shift…

But unless the U.S. and China can hash out some kind of resolution, this tariff tug-of-war will likely keep dragging the markets through the mud.

Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.