The U.S. economy, after three years, is beginning to contract again. Recent data suggests that the Federal Reserve’s task ahead is becoming increasingly difficult. For cryptocurrency investors, this week promises to be particularly eventful, especially with the recent release of the U.S. Personal Consumption Expenditures (PCE) data.
Why Is Bitcoin Falling?
Bitcoin’s decline is attributed to recent U.S. economic data pointing to underlying issues and former President Trump’s comments labeling it as “Biden’s market.” U.S. stock markets had a grim opening as employment figures weakened, and negative growth numbers were reported. Expectations for the Core PCE were at 2.6%, similar to the previous month’s figure of 2.8%.
The PCE data met expectations with an annual increase of 2.3%, while the Core PCE aligned with predictions at 2.6%.
- The U.S. Core PCE Price Index Monthly Reported: 0.0% (Forecast 0.1%, Previous 0.4%)
- The U.S. PCE Price Index Monthly Reported: 0.0% (Forecast 0.0%, Previous 0.3%)
- The U.S. Core PCE Price Index Annual Reported: 2.6% (Forecast 2.6%, Previous 2.8%)
- The U.S. PCE Price Index Annual Reported: 2.3% (Forecast 2.2%, Previous 2.5%)
- The U.S. Consumer Spending Monthly Reported: 0.7% (Forecast 0.6%, Previous 0.4%)
This data, which reflects a drop in inflation, indicates that, following recent recession signals, the Fed may need to consider lowering interest rates.
Consequently, Bitcoin 
$111,426 surged by $500, yet a caveat remains. Inflation is expected to rise again due to tariffs, irrespective of the low PCE readings. Thus, the Fed might declare it will not increase interest rates, potentially worsening recession signals. Alternatively, while interest rates may drop, inflation could escalate. Both scenarios make it challenging for the Federal Reserve, placing cryptocurrencies in a precarious position.
