Stagflation concerns are resurfacing in the U.S. economy. One key factor is rising oil prices amid escalating geopolitical tensions surrounding Iran. Higher energy costs can strengthen inflationary pressure across the economy. At the same time, the latest U.S. labor report signals potential weakness in the job market.
Employment declined by 92,000 in February and the unemployment rate rose to 4.4%, exceeding expectations. Persistent inflation alongside a cooling labor market raises concerns about a possible “high inflation + low growth” environment.
Stagflation refers to a period when economic stagnation and inflation occur simultaneously. The most prominent example occurred in the United States during the 1970s oil shocks, when inflation surged into double digits while unemployment also rose significantly. The Federal Reserve eventually responded with aggressive tightening under Chairman Paul Volcker, pushing interest rates close to 20%, which subdued inflation but triggered a severe recession.
For Bitcoin, the relationship with stagflation is complex. In the early phase, tighter monetary conditions and shrinking liquidity can create headwinds for risk assets. During the high-inflation period of 2022, both the NASDAQ and Bitcoin declined sharply, reflecting Bitcoin’s behavior as a high-beta asset.
However, the dynamic can change if stagflation leads to financial instability. During the 2023 U.S. banking crisis, capital moved into alternative assets including Bitcoin, which rose roughly 80%.
Another key factor is Bitcoin’s supply structure. CryptoQuant data shows Bitcoin’s supply inflation continues to decline due to halvings and increasing long-term holder accumulation. Unlike fiat currencies, whose supply can expand through monetary policy, Bitcoin’s issuance is algorithmically fixed, making its scarcity increasingly relevant in inflationary environments.
Written by XWIN Research Japan