Bitcoin Drops 3% as US Inflation Data Surprises

On March 28, Bitcoin (BTC) experienced a 3% drop as the US Personal Consumption Expenditures (PCE) Index data came in higher than expected. The data showed that the core PCE, which excludes volatile food and energy prices, increased by 0.1% more than anticipated on a month-on-month basis and by 0.1% more on a year-on-year basis. This unexpected rise in inflation data led to a reversal in Bitcoin's price, which had initially risen to $85,500 at the Wall Street open before falling to lows under $84,500 on Bitstamp. This marked the lowest levels for Bitcoin since March 23.

Analysts and traders reacted to the data, with some expressing concerns about the potential for stagflation in the future. The Kobeissi Letter, a trading resource, noted that the current macroeconomic trajectory could lead to stagflation in 2025, given the rising inflation and the ongoing trade war. Others, such as popular trader Daan Crypto Trades, anticipated volatility in the markets due to the PCE data release.

Despite the inflation warning, some market participants remained optimistic about Bitcoin's price action. Michaël van de Poppe, a trader, analyst, and entrepreneur, noted that the trend for Bitcoin remained upward but acknowledged that the price was shaking. He predicted that if the price dropped below $84,000, it could test levels as low as $78,000 to $80,000 before bouncing back up. Fellow trader TheKingfisher saw little chance of a full bullish comeback on short timeframes, suggesting that the current conditions appeared more in line with a typical market cooldown.

Overall, the higher-than-expected PCE data led to a 3% drop in Bitcoin's price, with analysts and traders expressing mixed reactions to the potential impact on the cryptocurrency market. While some saw the data as a warning sign for future inflation, others remained optimistic about Bitcoin's price action in the short term. However, the overall sentiment suggested that the market was approaching a seasonal reset, potentially front-running the familiar ‘sell in May and go away’ dynamic.