Federal Reserve's potential dovish pivot following mixed US economic reports a boon for bitcoin, analysts say

U.S. macro reports mounted pressure on bitcoin and the cryptocurrency market on Wednesday as stagflationary data joined regressive GDP numbers and muted jobs growth in the private sector.

Private-sector employment increased by only 62,000 jobs in April, below the anticipated 108,000 and sharply lower than March’s 147,000, according to ADP Employment figures.

First-quarter U.S. GDP declined by 0.3%, marking the first negative reading since 2022, compared to the expected 0.2% growth. Yet, inflation stalled according to the Personal Consumption Expenditures (PCE) index, which is also the Fed’s go-to indicator for interest rate decisions. March PCE increased to 2.3% year-over-year (YoY), just shy of the predicted 2.2% rise. The Core PCE, excluding food and energy costs, matched the 2.6% YoY economic forecast but fell below February’s revised 3.0% data.

Following the news, bitcoin briefly slipped under $94,000 and was down 1%. Major altcoins like ether and solana also experienced declines, contributing to an overall market pullback of nearly 4%. The sector had recovered slightly as of writing, according to The Block’s price page. In traditional markets, equities tracked by the S&P 500, Nasdaq Composite, Dow Jones, and the NYSE Composite also showed losses on the day.

May's policy meeting

Wednesday’s mixed economic signals introduced fresh uncertainty, David Hernandez, crypto investment specialist at 21Shares, told The Block in an email. Hernandez opined that the Federal Reserve may be inclined to cut rates and provide financial relief.

"Fed funds futures are now reflecting increased probability of 4+ rate cuts this year, as the Fed navigates between reduced inflation and clear signs of economic slowdown," Hernandez said. "This delicate balancing act will be central to market dynamics in the coming weeks."

Lower rates could be a boon to bitcoin and risk assets, Dr. Kirill Kretov, senior automation expert at CoinPanel, told The Block. Kretov said a weakened dollar, better liquidity from looser monetary policy, and lower Treasury yields offer a "more supportive macro backdrop" for BTC and crypto.

"Layer in the surprise –0.3% GDP print, and President Trump’s escalating pressure on the Fed toward easier policy, and the dovish shift looks even more likely," Kretov added. "With tariff risks easing in some areas and Bitcoin liquidity still thin, even modest inflows could send BTC sharply higher. It’s a market primed for upside but also hypersensitive to macro shifts."

The U.S. Federal Reserve is scheduled for May 6-7 to decide whether the apex bank will cut, keep, or increase the current funding rate.