A recent scholarly investigation disputes the prevailing “permanent disinflation” narrative within the cryptocurrency sector, hinting that U.S. inflation could resurge, surpassing 4% by mid-2026. This burgeoning inflation scenario presents a potential drawback for Bitcoin investors, who anticipate reductions in interest rates. Such an outlook emerges amidst escalating global bond yields, adding unpredictability to the near-term trajectory of volatile assets, notably digital currencies. Experts caution that any deferred monetary policy easing might intensify market fluctuations.
Is Inflation on the Rise Again?
Adam Posen, presiding over the Peterson Institute for International Economics, along with Lazard CEO Peter R. Orszag, propose in a fresh analysis that U.S. living costs could inflate beyond current expectations. Their findings suggest that tariffs, shrinking labor resources, and fiscal exuberance might counterbalance productivity enhancements from AI, limiting disinflationary effects.
They observe the lagged effect of tariffs set in the previous U.S. administration, projecting these will increment headline inflation by about 50 basis points come mid-2026. Additionally, potential labor shortages due to deportations might elevate wages, fostering demand-driven inflation.
Relaxed fiscal policies could further push the budget deficit over 7% of GDP. The duo warns that loosened financial conditions and fluctuating inflation perceptions might further spur consumer price hikes. Current market beliefs centered on housing inflation decline and productivity advances are deemed inadequate by their study.
What Lies Ahead for Bitcoin?
In 2025, the U.S.’s core inflation measure dipped to around 2.7%, bolstering forecasts of the Federal Reserve opting for significant interest cuts. Some banks predict a rate reduction of 50–75 basis points, whereas cryptocurrency markets anticipated even swifter shifts.
Insights from Bitunix exchange convey that the potential risk in policy does not arise from premature loosening but from excessive prudence. By overlooking structural disinflation, a substantial policy recalibration might be necessitated down the road. Markets are adjusting, pricing in a scenario that considers “delayed compensation.”
The bond market’s fluctuations, with the 10-year U.S. Treasury yield touching 4.31%—a five-month peak—are dampening risk enthusiasm. A pronounced decline in Japanese bond prices further pushed yields up globally. In response, Bitcoin slumped nearly 4% this past week, trading near $90,000, while elevated yields increased the opportunity costs associated with equities and digital assets.
The study draws practical insights:
- Trump-era tariffs are adding to mid-2026 inflation expectations.
- A labor squeeze may induce wage-driven price hikes.
- Budget deficits above 7% of GDP could exacerbate inflation.
- Markets may face abrupt adjustments if structural disinflation isn’t addressed.
The unfolding interplay of these economic variables paints a complex picture for investors, particularly within the cryptocurrency domain. Global market watchers continue to track these developments closely.
