Fidelity, a financial services company, has released a report that suggests Bitcoin (BTC) could be benefited by upcoming inflation.
Chris Kuiper is the Director of Research at Fidelity’s Crypto arm. He says that in a recent report, “stubborn inflation” and the fiscal deficits could indicate the US entering a period of Stagflation, a negative economic climate characterized by high inflation, stagnant growth and high unemployment.
Kuiper says that Bitcoin’s response would be dependent on how the government and currency respond to stagflation.
If fiscal and monetary organizations chose to combat the “stag” part of the issue through increased spending, or by using monetary instruments, Bitcoin may perform well, although with a lag.
“However, if the control of ‘flation,’ becomes the highest priority, with significant reductions to the money supply and liquidity and fiscal spending then Bitcoin may face relative headwinds.”
Kuiper notes that, despite this, gold prices rose significantly in response to a second inflation wave during the 1980s.
While we don’t know the exact macroeconomic scenario for 2025 we believe Bitcoin will continue to be a good investment in multiple scenarios. In the event of a recession, additional fiscal and monetary stimulus will be used to counteract it, historically boosting Bitcoin.
Bitcoin is also expected to do well if risk assets keep appreciating and inflation remains above 2%. Bitcoin’s relative performance will be affected only if fiscal spending is drastically cut and money creation slows or reverses. This is our least-likely scenario, given that the current fiscal state of the country has high structural deficits, and the monetary system is highly indebted.
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The post Potential New Wave Of Inflation to Be Good For Bitcoin in 2025: fidelity may be updated as new information becomes available.
