Fed Raises Stagflation Concerns, Analysts Predict Bitcoin Could Thrive in Such an Environment
The Federal Reserve is growing more concerned about the possibility of stagflation—a scenario where economic growth stagnates while inflation continues to rise, potentially complicating the central bank’s decision-making process.
Chair Jerome Powell stressed that the economy remains in “good shape” and that the Fed is in a strong position to “wait and see” before altering its policy. However, small yet telling changes in the Fed’s latest statement indicate that concerns over economic growth and inflation are escalating.
At its latest meeting, the central bank held its key interest rate steady, acknowledging the mounting risk of inflation and higher unemployment. This combination is a textbook example of stagflation, a challenging economic environment not seen since the 1970s. In such a situation, the Fed would have limited ability to stimulate the economy without worsening inflation.
“Stagflation risks are now firmly on the Fed’s radar,” said Zach Pandl, head of research at Grayscale, in a post on X. “We believe this environment could actually be beneficial for Bitcoin.”
Pandl explained that stagflation, driven in part by tariffs, tends to hurt traditional assets like stocks and bonds but is more favorable for scarce assets like gold. “Bitcoin, though a relatively new asset, is increasingly seen as a digital version of gold, a modern store of value in a stagflationary environment,” he noted.
Following the Fed’s decision, Bitcoin held steady in a narrow range, briefly touching $97,500 before retreating to $96,500, up 1.6% over the past 24 hours.
Meanwhile, the broader crypto market, as tracked by the CoinDesk 20 Index (CD20), rose by a modest 0.3%, despite declines in altcoins like XRP, AVAX, UNI, NEAR, and AAVE, which fell by 1% to 3%.
In the equities market, the S&P 500 and Nasdaq both recovered slightly, with gains of 0.4% and 0.3%, respectively.
