Bitcoin ‘reflation’ bets diverge after US PMI breaks three-year resistance

The recent publication of robust US Purchasing Managers’ Index (PMI) data, which successfully breached a significant multi-year overhead resistance level, has triggered a sharp reassessment of ‘reflation’ trades, creating divergence among Bitcoin investors. The PMI data suggests US economic expansion is accelerating rather than slowing, challenging narratives that underpinned aggressive Federal Reserve rate cut expectations.

For Bitcoin (BTC) investors, typically holding the asset as both a risk-on barometer and an inflation hedge, the strong economic signals present a paradox. Historically, the ‘reflation bet’ posits that government spending and economic stimulus lead to inflation, benefiting hard assets like Bitcoin. However, the current strength, exemplified by the PMI crossing critical thresholds (often above 54), implies sticky inflation and robust demand—a scenario likely to maintain higher-for-longer interest rates.

One camp of investors views the strong PMI as fundamentally bullish, arguing that a resilient economy prevents a liquidity crisis and supports overall risk asset valuations, including crypto. They focus on continued institutional inflows via ETFs and the structural supply shock from the recent halving, seeing macroeconomic strength as a net positive.

The opposing camp, however, is rotating away. They emphasize the rising opportunity cost associated with holding non-yielding assets. Strong economic data immediately pushes Treasury yields higher, increasing the discount rate applied to future BTC value and strengthening the US Dollar. For these investors, the immediate policy implication of a rising PMI is tighter monetary conditions, leading to short-term profit-taking and a divergence from the aggressive reflation narrative that characterized the previous quarter.

Market analysts note that Bitcoin’s price action is now caught between powerful structural adoption drivers and macroeconomic headwinds driven by data certainty—a tension unlikely to resolve until clear signs emerge regarding the Fed’s terminal rate path.

Source: Bitcoin ‘reflation’ bets diverge after US PMI breaks three-year resistance