Analyst: Fed’s Stagflation Risk Signal Could Be a Positive for Bitcoin
Author: Christian Sandor | Edited by: Stephen Alpher Updated: May 8, 2025, 12:30 PM Published: May 7, 2025, 9:09 AM
The Federal Reserve is increasingly aware of the threat of stagflation – a complex combination of slowing economic growth and rising inflation – that could pose a challenge to policymakers.
While Chairman Jerome Powell maintained that the economy was in “good shape” and stressed that the central bank was “in a good position to wait and see” before making policy changes, small changes in the central bank’s policy statement indicate increased concern about the direction of the economy.
By leaving its benchmark interest rate unchanged today, the U.S. central bank acknowledged the growing risk of higher inflation and unemployment—roughly equivalent to the stagflation that prevailed for much of the 1970s. Such a scenario would limit the central bank’s ability to stimulate a flagging economy without further fueling inflation.
“The Fed is concerned about stagflation,” Zach Pandl, head of research at Grayscale, wrote on platform X after the decision. “We think this outcome would be good for Bitcoin.”
In an earlier report, Pandl argued that rate hikes are fueling stagflation, which has historically hurt traditional assets but benefited scarce stores of value like gold. “Bitcoin has not been available during previous stagflation periods,” he wrote, “but it can be viewed as a scarce digital commodity and is increasingly being embraced as a modern store of value.”
Bitcoin traded in a narrow range after the Fed’s statement and Powell’s comments. It briefly reached $97,500 on Wednesday amid optimism over U.S.-China trade talks before settling back to $96,500, up 1.6% in the past 24 hours.
The CoinDesk 20 Index (CD20), a broader measure of the crypto market, rose just 0.3% over the same period, led by 1-3% declines in XRP, AVAX, UNI, NEAR, and AAVE.
Meanwhile, stocks recovered modestly from earlier losses, with the S&P 500 and Nasdaq indices closing up 0.4% and 0.3%, respectively.
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