Bitcoin staged a modest recovery in early Friday trading, rising approximately 1.6% to trade around $67,918. The move higher follows a recent pullback that saw the digital asset touch a session low near $65,683. Meanwhile, Ether, the second-largest cryptocurrency, experienced slight pressure, dipping 0.3% to $1,955.
All Eyes on Inflation Data
The primary focus for financial markets remains the impending release of the Personal Consumption Expenditures (PCE) price index, the Federal Reserve's favored inflation metric. Scheduled for release later today, February 20, 2026, the data is expected to provide critical insight into the trajectory of U.S. price pressures. Recent trading patterns indicate that Bitcoin is increasingly reacting to major macroeconomic indicators like the PCE, aligning its behavior more closely with traditional risk assets than niche crypto-specific news.
This comes amid a backdrop of a divided Federal Reserve. Minutes from the late-January policy meeting revealed that while some officials believe the tightening cycle is complete, others remain prepared to consider further interest rate hikes should inflation fail to cool sufficiently toward the central bank's 2% target. "Policymakers are navigating conflicting signals with inflation still elevated," noted David Russell, Global Head of Market Strategy at TradeStation.
Spot ETF Flows Turn Negative
Capital flows into U.S.-listed spot Bitcoin exchange-traded funds (ETFs) reversed course on Thursday. Data from Farside Investors indicates the products collectively experienced net outflows of $165.8 million. The outflow was heavily concentrated, with BlackRock's iShares Bitcoin Trust (IBIT) accounting for $164.1 million of the total withdrawal. This shift follows a period of sustained inflows and introduces a new headwind for the crypto market's recent rally.
Regulatory and Legislative Developments
In Washington, discussions around crypto market structure continue. Reports indicate the White House is attempting to broker an agreement between traditional banks and cryptocurrency companies concerning a pending market-structure bill. A central point of debate remains whether stablecoins should be permitted to offer interest-like rewards on customer balances.
Industry participants reported constructive dialogue following a Thursday meeting. Coinbase Chief Legal Officer Paul Grewal stated on social media platform X that "the dialogue was constructive and the tone cooperative." Similarly, Ripple's Chief Legal Officer, Stuart Alderoty, indicated that specific legislative language was reviewed and that work would continue in the coming days.
Separately, the Securities and Exchange Commission (SEC) provided updated guidance. The SEC's Trading and Markets division clarified in a revised FAQ that broker-dealers handling "payment stablecoins" would not face regulatory objection to applying a standard 2% haircut when calculating net capital.
Broader Market Drivers
Macroeconomic forces continue to exert significant influence. The U.S. dollar is poised for its strongest weekly performance since October, bolstered by robust economic data and a Fed maintaining a hawkish posture. Additionally, heightened geopolitical tensions, particularly between the U.S. and Iran, have prompted traders to exercise caution ahead of the weekend, with some positioning for potential event risk.
Despite today's rebound, Bitcoin's recovery path appears fragile. A stronger-than-expected PCE print could propel Treasury yields and the dollar even higher, applying downward pressure on crypto valuations. Furthermore, if ETF outflows persist for another session, key technical support levels in the mid-$60,000 range could face a stern test.
Looking beyond today's inflation report, market participants will turn their attention to the Federal Reserve's next policy meeting scheduled for March 17-18, 2026, alongside any further signals from Washington regarding the future of digital asset legislation.
