Market Sentiment and CPI Data Expectations

Financial markets have been focused on the upcoming Consumer Price Index (CPI) report, with traders anticipating a slight decline in inflation. Meanwhile, crypto markets received promising updates regarding new legislation for the industry, signaling potential regulatory clarity.

On March 11, U.S. stock markets closed lower, with Dow Jones dropping 1.14%, S&P 500 losing 0.75%, while Nasdaq remained flat. Futures showed a slight recovery, while gold traded around $2,922 per ounce and oil remained stable at $66.6 per barrel.

Recent data indicated a significant decline in egg prices (down 25% in a week), gasoline prices hitting a four-year low, and overall disinflationary trends. Inflation tracking service Truthflation reported a sharp drop in real-time inflation rates, stating that CPI data lags by about 45 days. This suggests that official CPI figures will likely continue their downward trend in the coming months, strengthening the case for Federal Reserve rate cuts.

Bitcoin rebounded to $82,000 after briefly dipping to $76,000, while altcoins followed with modest recoveries. The crypto market capitalization stands at $2.76 trillion, still facing selling pressure from U.S. spot Bitcoin and Ethereum ETFs.

Despite market turbulence, crypto ETFs continued to experience outflows, with $371 million leaving Bitcoin ETFs and $21.6 million exiting Ethereum ETFs. Leverage levels across exchanges have now returned to levels seen in November 2024, right before Trump’s reelection rally.

Trade War Tensions Escalate Between the U.S. and Canada

Trade disputes remain a primary concern. On March 10, President Trump accused Ontario, Canada, of imposing a 25% tariff on electricity exports to the U.S. In response, he threatened to double tariffs on Canadian steel and aluminum imports to 50% starting March 12.

Canada retaliated by warning of potential electricity sup

ply cuts to U.S. states such as Michigan, Minnesota, and New York. However, after discussions, Ontario Premier Doug Ford agreed to suspend the electricity tariffs, preventing immediate escalation. Following this, Trump also halted the tariff hike on Canadian metals.

The situation remains fluid as Canada and the U.S. prepare for further negotiations on the renewal of the U.S.-Mexico-Canada Agreement (USMCA). The Ontario Premier is set to meet with U.S. trade representatives on March 13 in Washington, just ahead of the April 2 deadline for potential retaliatory tariffs.

Meanwhile, Canada has issued U.S. dollar-denominated bonds, suggesting it is bolstering its foreign reserves in anticipation of prolonged trade conflicts. Holding USD reserves helps mitigate currency instability, particularly if the Canadian dollar weakens amid trade tensions.

Across the Atlantic, Trump’s 25% steel and aluminum tariffs on Europe officially took effect on March 12, prompting the European Union to announce countermeasures on $28.33 billion worth of U.S. imports, effective in April. Australian Prime Minister Anthony Albanese condemned Trump’s actions as economically unjustifiable.

Despite escalating trade tensions, crypto markets showed resilience, with Bitcoin holding its ground despite broader financial market turmoil.

A New Crypto Bill is Coming to the U.S. Congress

U.S. Senator Cynthia Lummis and Michael Saylor hinted at major developments for Bitcoin legislation during their recent speech at the Bitcoin Policy Institute. Lummis reintroduced her Strategic Bitcoin Reserve Bill, stating that support within Congress has grown, and that President Trump fully backs the initiative.

Unlike Trump’s executive order establishing a Bitcoin reserve without taxpayer-funded purchases, Lummis’ bill would direct the U.S. government to acquire 1 million BTC over five years and hold it for 20 years.

Additionally, Senator Tommy Tuberville has joined forces with Lummis to introduce the BITCOIN Act, aiming to position the U.S. as a global leader in the crypto economy.

While Trump’s executive order solidified a national Bitcoin reserve, it is not legally binding beyond his presidency. Future administrations could reverse the policy, making Congressional approval crucial for long-term stability. This reinforces the importance of codifying Bitcoin policies into law.

U.S. House of Representatives Supports Stablecoins

In parallel to Bitcoin legislation, the U.S. House Financial Services Committee has shown strong support for stablecoins, recognizing their potential to modernize the payment system.

Stablecoins offer faster, lower-cost transactions with enhanced security via blockchain technology. They also provide global accessibility with minimal volatility compared to other digital assets, making them a viable financial instrument for cross-border payments.

The U.S. government’s embrace of stablecoins marks a major policy shift. A few years ago, many feared that the U.S. might ban crypto entirely, especially in 2018–2019 when regulatory uncertainty loomed. However, with stablecoins now representing a significant portion of U.S. dollar-backed financial infrastructure, an outright ban is no longer feasible.

With most stablecoins pegged to the U.S. dollar, they enhance the global reach of USD in a digital era, strengthening its dominance in global finance. The U.S. has a vested interest in fostering stablecoin growth, as stablecoin issuers hold massive reserves in U.S. Treasuries, providing a steady demand for government debt.

Rather than opposing crypto, the U.S. government benefits from supporting stablecoins, as they ensure long-term demand for U.S. Treasury bonds while reinforcing the dollar’s hegemony.

Ultimately, if the U.S. aims to maintain its financial dominance, it must support, rather than suppress, stablecoins. This isn’t just about crypto—it’s about preserving the dollar’s central role in the global economy.

Additional Market Updates and Developments

• Ukraine has accepted a U.S. proposal for a temporary 30-day ceasefire, taking steps toward long-term peace. This could ease geopolitical tensions, benefiting global markets.
• Metaplanet issued ¥2 billion ($13.5 million) in zero-interest bonds to buy Bitcoin. The company acquired 162 BTC, raising its holdings to 3,050 BTC.
• The U.S. House of Representatives voted to repeal the IRS DeFi broker rule, which would have forced DeFi platforms to comply with strict KYC regulations. The Senate will vote next.
• The SEC delayed decisions on Spot Solana ETF, Spot XRP ETF, Spot Litecoin ETF, and Spot Dogecoin ETF. This is standard procedure, likely awaiting the new SEC Chair’s confirmation before further rulings.

CPI Data & Market Expectations

The latest U.S. Consumer Price Index (CPI) report reveals that inflation has cooled more than expected. The headline CPI came in at 2.8% (forecast: 2.9%, previous: 3.0%), while Core CPI, which excludes food and energy prices, stood at 3.1% (forecast: 3.2%, previous: 3.3%).

This marks a significant disinflationary trend, reinforcing expectations that the Federal Reserve will begin cutting interest rates sooner than previously anticipated. With CPI falling below forecasts, markets now price in a 65% probability of a rate cut in June, up from 48% before the report.

Despite concerns over trade tariffs and their inflationary impact, real-time inflation indicators like Truthflation have suggested that inflationary pressures are easing across multiple sectors, including housing, transportation, and consumer goods. This CPI report aligns with that trend, giving the Federal Reserve more room to maneuver on monetary policy.

Market Reactions & Economic Implications

Stock Market Reaction: Mixed Sentiment

The S&P 500 and Nasdaq initially reacted positively to the lower-than-expected CPI, reflecting optimism that rate cuts are coming sooner than expected. However, Dow Jones faced selling pressure, as investors remain cautious due to ongoing trade uncertainties and corporate earnings concerns.

Historically, lower CPI readings tend to boost equity markets, as they reduce the risk of prolonged high-interest rates that pressure corporate profit margins. However, market sentiment remains fragile, given the trade war developments with Canada, China, and Europe.

Bond Yields Drop, Rate Cut Expectations Rise

Bond markets reacted sharply, with the U.S. 10-year Treasury yield dropping below 4.1% as traders increase bets on multiple rate cuts in 2024. With inflation cooling faster than expected, the probability of three rate cuts this year (June, September, December) has increased significantly.

Lower bond yields also make high-growth stocks and risk assets more attractive, potentially setting up a rebound for both equities and crypto in the coming months.

Crypto Market Outlook: BTC & Stablecoins in Focus

Bitcoin & Crypto Markets React Cautiously

Crypto markets saw a brief uptick following the CPI release, with Bitcoin rebounding to $83,000 after hitting a low of $76,000 earlier in the week. However, the reaction remains muted, as crypto is still experiencing ETF outflows and broader market uncertainty.

The CPI report reinforces the bullish case for Bitcoin in the medium to long term, as lower inflation and lower interest rates generally weaken the U.S. dollar, making Bitcoin and crypto more attractive as alternative stores of value.

Stablecoins & DeFi Get More Attention

Lower inflation also strengthens the role of stablecoins, as they serve as on-chain representations of the U.S. dollar in global financial markets. With Congress showing increasing support for stablecoins, the sector is poised for mass adoption in both institutional and retail finance.

At the same time, DeFi protocols and staking yield products become more appealing in a lower-interest-rate environment. As traditional bond yields decline, investors will seek yield opportunities in decentralized finance (DeFi), potentially driving higher adoption of stablecoins, lending platforms, and yield-bearing assets.

Trade War & Inflation: Will Tariffs Disrupt the Disinflationary Trend?

Although inflation is cooling, trade tariffs remain a major risk factor that could reverse the downward trend in CPI.

Trump’s aggressive tariffs on Canada, China, and the EU have led to higher costs for imported goods, raising concerns that the disinflationary trend could be temporary. However, the current CPI report does not yet reflect the full impact of these tariffs, as it typically takes one to two months for trade policies to affect consumer prices.

If tariffs continue escalating, we may see a reacceleration in CPI later this year, potentially complicating the Federal Reserve’s ability to cut rates aggressively. This remains a key variable for both financial markets and crypto moving forward.

The Road Ahead for Crypto and U.S. Policy

The past few days have shown that regulatory clarity is slowly emerging for Bitcoin, stablecoins, and the broader crypto market. Despite trade war tensions and macroeconomic uncertainties, U.S. lawmakers are increasingly engaging with crypto-related policies.

With Bitcoin reserve legislation gaining momentum, stablecoin frameworks receiving Congressional support, and regulatory barriers being removed, the U.S. is positioning itself as a leader in the global digital asset space.

As the Federal Reserve navigates inflation, and U.S. lawmakers define long-term crypto policy, the next few months will be critical in shaping the future of digital assets within the world’s largest economy.