Crypto markets are on high alert ahead of the release of the U.S. Personal Consumption Expenditures (PCE) data for December, the Federal Reserve's preferred inflation gauge. Forecasters, including Wall Street Journal chief economics correspondent Nick Timiraos, anticipate both headline and core PCE to rise 0.37% month-over-month, equivalent to a 4.5% annualized pace. This would lift the core PCE index to 3.0% year-over-year—the highest level since February 2025—while headline PCE is estimated at 2.9%, the highest since March 2024.
This median forecast represents an acceleration from November's softer readings of 0.21% for headline and 0.16% for core. The implications for cryptocurrency markets are significant. A hotter-than-expected print could reinforce expectations that the Fed will keep interest rates higher for longer, potentially pushing Treasury yields and the U.S. dollar higher. This scenario is typically a headwind for risk assets, including Bitcoin (BTC) and altcoins. Conversely, a cooler inflation reading could revive bets on future rate cuts and trigger a relief rally across digital assets.
Bitcoin is currently trading around $67,852, up 1.27% on the day, as it consolidates below the key $70,000 psychological resistance level. Technical indicators show muted momentum, with the daily Relative Strength Index (RSI) at 36.86, recovering from oversold levels but still signaling weakness. The balance of power indicator remains negative at -3,298, suggesting sellers retain a slight edge. A hot inflation surprise could send BTC back toward mid-$60,000 support, while a softer reading may open the door for a test of the $70,000 resistance.
The market's defensive posture is further evidenced by the BTC/ETH ratio, which stands at 34.5806, reflecting continued Bitcoin dominance over Ethereum. This ratio surged from below 30 in late January to above 34 in early February, indicating capital has favored the perceived safety of Bitcoin during the recent market pullback. The outcome of the PCE data could dictate the next move: a hot print may extend Bitcoin's dominance, while a cooler one could encourage rotation back into Ethereum and higher-beta altcoins.
Traders are advised to watch the immediate reaction in the U.S. 10-year Treasury yield and the dollar index, as crypto has remained highly sensitive to shifts in interest rate expectations. With core PCE potentially hitting a near one-year high, today's data will be crucial in shaping the Fed's policy narrative and setting the tone for digital assets heading into March.
