Bitcoin slid toward $73,300 after April's PCE report, released on Thursday, May 28. Annual inflation at 3.8% is double the Fed's target and kills any hope of rate cuts, just as new chair Kevin Warsh takes over with a hawkish reputation. The crypto market, which had anticipated a possible dovish pivot, now faces a macro reality that offers no respite.
The Signal
Headline PCE inflation rose 3.8% in April from a year earlier, its hottest pace in two years and nearly double the Federal Reserve's 2% goal. Core PCE held at 3.3%, its highest reading since October 2023. The monthly numbers ran cooler, with core easing to 0.2% against the 0.3% economists had expected, providing a brief sigh of relief that markets seized upon momentarily.
Bitcoin reacted by sliding toward $73,300 in the hours after Thursday's release and hovering near $73,000 through the weekend, down roughly 30% across the past year. The report brought enough monthly relief to keep the rate-cut narrative alive, and enough annual heat to keep liquidity scarce. The initial reaction was mixed: equity futures edged higher, but the dollar strengthened, capping risk appetite.
“3.8% inflation is exactly what a Fed chair with a tight-money temperament needs to justify sitting still.”
Context is key: Kevin Warsh, who assumed the Fed chair on May 1, has signaled in his first public statements that inflation remains "unacceptably high." This contrasts with the more moderate stance of his predecessor, Jerome Powell. Warsh, known for his hawkish approach during his tenure as a Fed governor from 2006 to 2011, has already hinted that he prefers to err on the side of restrictiveness rather than allow inflation to become entrenched. For Bitcoin, this means the path to lower rates could be longer than anticipated.
