Bitcoin Market In Uncertain Phase As Stagflation Fears Rise In US – Details
In their latest publication on CryptoQuant, XWIN Research Japan examines how news developments in the United States could affect the trajectory of Bitcoin and other risk assets in the near term. According to the academic institution, the concern of a possible period of inflation has begun to emerge, which may boost or hinder the growth of Bitcoin.
Unemployment Rate Rises to 4% as Inflation Builds
In context, inflation is a rare economic condition that combines two related phenomena at the same time: high inflation and high unemployment. In their QuickTake article on CryptoQuant, XWIN Research Japan revealed that the number of people employed in the United States fell by 92,000 in February, indicating a 4% increase in the unemployment rate.
This was followed by a heightened state of tension in the United States, due to the geopolitical conflict created by the US-Israeli joint attack on Iran. This conflict has caused the price of oil to rise, which has made energy sources even more expensive. According to XWIN Research Japan, this increase in energy costs may also cause more inflation, thereby ending the stagflation equation.
Notably, a shared historical example of stagflation occurred in the United States during the oil shock of the 1970s; inflation was in the double digits, unemployment rates were following such a devastating path. According to XWIN Research, inflation was finally brought down by Federal Reserve Chairman Paul Volcker, who raised interest rates to nearly 20%, with a massive recession as a result.
How Bitcoin Gets Past Periods of Stagflation
XWIN Research Japan also notes that Bitcoin’s relationship with US stagflation is ambiguous, rather than a direct, direct relationship.
Analysts explain that the early stages of stagflation are marked by inflation of risk assets. When inflation is high (as seen in 2022), both the NASDAQ and the price of Bitcoin will drop significantly, indicating that Bitcoin has acquired the title of a high-beta asset.
However, conservatives can see a faster turnaround in cases where inflation causes financial instability, as happened in the US banking crisis of 2023. In this scenario, capital moved to high-risk assets like Bitcoin, resulting in a bullish rally of over 80%. Also, the unique supply structure of Bitcoin must be considered when making predictions.
Unlike fiat currencies, Bitcoin issuance follows a fixed algorithm where periodic halving events reduce the rate of entry of new supply. This means that the inflation rate of Bitcoin continues to decrease, thereby increasing its attractiveness in a market where traditional currencies suffer from the effects of inflation.
If this situation persists now, the Bitcoin market could witness a large amount of income in the middle of the term. As of this writing, Bitcoin is trading at $68,225, recording a loss of more than 4% since the previous day.
Featured image from Flickr, chart from Tradingview
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