The latest U.S. inflation data came in lower than expected, but Bitcoin struggled to maintain gains as trade war concerns weighed on sentiment.

According to the economic latest data released on Mar. 12, February’s Consumer Price Index rose 2.8%, below the 2.9% forecast. Core CPI, which excludes food and energy, dropped to 3.1%, slightly better than the expected 3.2%.

Markets responded by increasing bets on Federal Reserve rate cuts. Traders now price in a 31.4% chance of a cut in May, up from just 9% last month. The probability of three cuts by year-end jumped to 32.5%, while expectations for four cuts surged from 1% to 21%.

Bitcoin (BTC) briefly surpassed $84,000 before falling back to $83,000, wiping off the majority of its post-CPI gains, despite the softer inflation data. Equities were unable to sustain early gains, and other financial markets also suffered. Analysts point to ongoing trade tensions as a key factor limiting risk appetite.

Canada recently responded to U.S. steel and aluminum tariffs with $21 billion in tariffs on U.S. exports. The European Union then imposed additional tariffs on American goods valued at $28 billion. There is growing concern that rising trade disputes may raise inflationary pressures and complicate the Federal Reserve’s decision-making.

According to The Kobeissi Letter, the U.S. faces a $9.2 trillion debt refinancing challenge in 2025. Without lower interest rates, borrowing costs could rise sharply, further straining the national debt, which now exceeds $36 trillion. Market uncertainty remains high, with investors closely watching developments in both monetary policy and global trade.

On-chain data, meanwhile, indicates that cryptocurrency traders are losing confidence. Crypto-wide trading activity has been declining since its peak in late February, according to Santiment.

Over the last two weeks, market capitalization losses have left traders hesitant, with signs of exhaustion and capitulation creeping in. Even Bitcoin’s CPI-driven bounce failed to spark any real uptick in trading activity.

📊 Crypto-wide trading volume has been dropping since its peak back on February 27th (when traders were optimistically buying dipping prices). After further market cap declines these past two weeks, trader behavior indicates a mix of exhaustion, hopelessness, and capitulation.… pic.twitter.com/0kqBVkKRpQ

— Santiment (@santimentfeed) March 12, 2025

This type of volume decline typically indicates weak market momentum amid small price recoveries. Gains can swiftly wane in the absence of strong buying interest, leaving prices open to further declines.

Retail and institutional traders appear to be in a holding pattern at the moment, waiting for the other to move. Until volume picks up meaningfully, caution is likely to dominate.