Bitcoin (BTC) rebounded to $82,700 on Wednesday, recovering 5.52% from recent losses as traders prepared for increased volatility ahead of the US Consumer Price Index (CPI) release. The crypto market, which has been under pressure due to macroeconomic uncertainty, is closely watching inflation data that could influence Federal Reserve (Fed) policy decisions.

Bitcoin Recovers from Key Support Levels

BTC had recently fallen below its 200-day Exponential Moving Average (EMA) at $85,664, dropping 9.14% in a single day before finding support at $78,258. The sharp recovery suggests strong buyer interest at lower levels, but market sentiment remains cautious.

According to CoinMarketCap, the crypto market has been in a risk-on mode, but investor sentiment remains fragile despite developments like Bitcoin reserves being announced in the US. Agne Linge, Head of Growth at WeFi, noted that persistent sell-offs since March 3 have led to millions of dollars in liquidations, impacting long traders.

Macroeconomic Pressures Cloud Crypto Outlook

While Bitcoin’s recovery is encouraging, the broader macroeconomic landscape remains uncertain. Geopolitical tensions between the US, China, Mexico, and Canada, along with concerns over global trade policies, continue to weigh on investor sentiment.

A Bitfinex report published on Monday highlighted mixed economic signals, with strong US job growth in February (151,000 jobs added) but a slight rise in unemployment to 4.1% due to government job cuts. Rising wages have supported consumer spending, but inflationary pressures could challenge expectations of Fed rate cuts in 2025.

Inflation Data to Determine Market Direction

The US inflation report is expected to show a decline in both headline and core CPI, marking the first drop since July 2024. A lower inflation reading could strengthen expectations for Fed rate cuts, which typically benefit risk assets like Bitcoin.

However, if inflation remains high, the Fed may maintain its restrictive stance, tightening financial conditions and potentially weighing on crypto market enthusiasm. Producer Price Index (PPI) data, due on Thursday, will also provide further insight into inflation trends.

Crypto Market on High Alert

Beyond inflation, uncertainty over Donald Trump’s trade policies could impact global markets, potentially driving investors toward safe-haven assets like gold rather than speculative markets like crypto.

With inflation data shaping Fed policy expectations, traders remain on edge for potential market swings. While Bitcoin’s recovery to $82,700 is a positive sign, its ability to sustain gains will largely depend on macro developments and regulatory clarity in the coming weeks.