Bitcoin Takes Off! Inflation Surprises, Trump Gives In

The price of Bitcoin soars after a collapse in inflation in the US and Trump's unexpected tariff truce. Is this the start of a new bullish era?

Bitcoin (BTC) experienced a notable rally this Saturday, posting gains of 2.22% to trade at $85,276 at the close. The leading cryptocurrency continued its recovery that began on Friday, driven by US inflation data that surprised the market with a sharp drop in the Producer Price Index (PPI). The crucial monthly PPI figure plummeted to -0.4%, far exceeding expectations of 0.2%. This decline, the second consecutive one after 0.1% the previous month, marked lows not seen since March 2023.

The Bitcoin price is currently testing the resistance zone marked by the 50-period exponential moving average, a short-term indicator located at $85,700. / TradingView

Double Bullish Momentum: Falling Inflation and Tariff Truce

The unexpected drop in inflation data was compounded by the pause announced by President Donald Trump in the application of tariffs on 75 countries, generating a tailwind for risk assets, including Bitcoin and the rest of the cryptocurrency market. Bitcoin, considered by some investors to be a risk asset due to its correlation with the Russell 2000 index, experienced strong momentum since Friday amid growing speculation that the US Federal Reserve could be inclined to implement further interest rate cuts sooner than anticipated.

Bonds on the Rise and Speculation of a Reactive Fed

Aggravated by this outlook was a sharp rebound in 10-year Treasury yields, which reached highs of 4.59% last Friday. This increase raised alarm bells in the White House and, according to unconfirmed sources, may have forced President Trump to suspend the implementation of the tariffs. A sharp rise in bond yields could, in theory, pressure the Federal Reserve to consider emergency intervention to cut rates, although this latter possibility remains a matter of speculation.

Dollar in Freefall: Direct Benefit for Cryptocurrencies?

Weaker inflation gives the Federal Reserve greater room to maneuver to implement interest rate cuts. This prospect puts downward pressure on the US dollar, which has historically benefited cryptocurrencies. In this regard, last Friday, the dollar recorded significant losses of 1.12%. The DXY index, which measures the dollar's strength against six major currencies, plummeted to 99.78, marking an intraday low of 99.01. After losing the 103.29 point support over the past three days, the DXY now faces another crucial support level, the loss of which could precipitate a dollar decline towards the 95 point zone in the coming sessions.

Futures Market Bets Reflect Optimism

The favorable inflation data also had a direct impact on bets in the federal funds futures market. The probability that the Federal Reserve will keep interest rates unchanged at the next meeting on May 7th dropped significantly to 60.2%, compared to 81.2% last Thursday.

Bitcoin Technical Analysis: Resistance Tested

The Bitcoin price is currently testing the resistance zone marked by the 50-period exponential moving average, a short-term indicator located at $85,700. However, considering it's a weekend, the price increase has been relatively moderate, and trading volume remains below the average of the past 25 days. This could make it difficult for bulls to break through this resistance zone and advance toward the next fixed resistance level, located at $88,000. On the other hand, Bitcoin consolidated firm support in the $76,600 area, where it appears to have established a floor that has remained solid since March 11. Bitcoin bounced from this price zone twice with high trading volumes, reinforcing the importance of this support.

The combination of weaker-than-expected US inflation and Donald Trump's unexpected tariff pause injected renewed optimism into the cryptocurrency market, prompting Bitcoin to test key resistance levels. While low liquidity over the weekend could temper short-term bullish momentum, the prospect of a less aggressive Federal Reserve monetary policy could lay the groundwork for a continuation of the rally in the coming weeks. Investors will be closely monitoring the dollar's performance and upcoming statements from Fed officials for clearer signals about the future of interest rates.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Cryptocurrency tradingCurrency trading is highly volatile and carries significant risks, including the total loss of your invested capital. Consult a financial advisor before making any investment decisions.