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Bitcoin has surged toward $100,000 per bitcoin, soaring this week to levels not seen since before the markets’ tariff tantrum (and helped by a predicted $10 trillion Wall Street surprise).
The bitcoin price has added almost 30% since crashing to April lows as fears swirl around the future of the U.S. dollar.
“The Fed’s worst nightmare just got worse,” analysts with the The Kobeissi Letter posted to X. “The market knows that stagflation has arrived."
Commerce department data showed U.S. gross domestic product (GDP) for the first quarter contracted at a 0.3% annualized rate, weighed down by a record surge in imports.
The analysts also pointed to the latest reading of the Fed’s preferred measure of inflation, the personal consumption expenditures (PCE) price index, that was unchanged in March after advancing 0.4% in February.
"The PCE price index is now at its highest reading since July 2024, before the ‘Fed pivot’ began," Kobeissi analysts wrote.
In September, Fed chair Jerome Powell surprised markets with an interest rate cut, kicking off a monetary policy loosening cycle that’s been on pause for months.
Kobeissi researchers have previously warned of the looming threat of “stagflation,” referring to a combination of economic stagnation and climbing inflation.
“We have rising inflation with a weakening economy,” they wrote following this week’s data drop. “The Fed is facing the lose-lose situation they thought would never arrive.”
The Fed will meet next week to decide whether to change interest rates, with the market currently predicting it will leave rates on hold.
However, traders are betting the Fed will begin cutting in June, something that’s expected to boost the bitcoin price and risk assets.
"For bitcoin, such a scenario is a positive factor, since the easing of monetary policy traditionally leads to an influx of liquidity into risky assets," Tracy Jin, chief operating officer of bitcoin and crypto exchange MEXC, said in emailed comments.
Bitcoin’s performance in recent months at first disappointed traders as the bitcoin price fell along with stocks in the face of Trump’s escalating trade war.
However, the bitcoin price has surged back through April, making it one of the year’s better performing assets so far.
“Since president Trump’s Liberation Day announcement, bitcoin has charted its own course, surging past $90,000 and demonstrating remarkable resilience against the headwinds affecting traditional markets," David Hernandez, crypto investment specialist at 21Shares, said via email.
“This outperformance relative to the Nasdaq represents a significant departure from historical patterns. As the impacts of president Trump’s tariff policies begin to materialize more fully across the economy, we anticipate bitcoin could further disassociate from equities. The asset shows strong potential to outperform other risk assets as investors seek hedges against policy-driven market volatility.”
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