In 2025, US inflation rebounds, reshaping the cryptocurrency market

Warnings have emerged that U.S. inflation could rebound more quickly than expected. According to recent analysis published by the Peterson Institute for International Economics’s Adam Posen and Lazard’s Global Asset Manager Peter R. Orszag, U.S. consumer prices could exceed 4% in 2025. This directly contradicts the low-inflation scenario that Bitcoin bulls have been anticipating.

Key Causes of the Reemergence of Inflation

Recent economic analyses highlight the multifaceted factors that could fuel inflation. The researchers suggest that tariffs, a tight labor market, potential changes in immigration policy, and expansionary fiscal policies could sufficiently offset productivity gains from AI and the stabilization of housing prices.

Of particular note is the delayed pass-through effect of tariffs. Importers do not immediately pass increased costs onto consumers, but if this pass-through fully materializes by mid-2026, it could add 50 basis points to annual inflation. Additionally, labor shortages caused by immigration policy changes could intensify wage pressures, and the combination of large fiscal deficits and eased financial conditions could accelerate inflationary trends.

The Clash Between Fed Rate Decisions and Market Expectations

Inflation concerns are likely to significantly limit the Federal Reserve’s room to cut interest rates. As the trend shifted from disinflation last year to rising prices this year, the gap between risk asset investors’ expectations and reality has widened.

While investment banks forecast a 50–75 basis point rate cut by the Fed this year, cryptocurrency market participants are expecting more aggressive monetary easing. This gap is particularly evident in the timing of policy decisions. There is concern that maintaining an overly cautious stance after structural disinflation has taken hold could ultimately trigger sharper market corrections.

Signals from the Global Bond Market and Cryptocurrency Weakness

Fears of renewed inflation are already reflected in the global bond markets. The yield on the 10-year U.S. Treasury hit 4.31% in early January, the highest in five months, reflecting rising yields across developed countries including Japan.

Rising bond yields increase the appeal of safe assets while simultaneously diminishing the relative value of risk assets like stocks and cryptocurrencies. In fact, Bitcoin has fallen nearly 4% since January, hovering around $90,000, with current prices around $88,000. This is not just a short-term correction but is interpreted as a structural change in the macro interest rate environment.

The New Relationship Between Inflation and the Cryptocurrency Market

Traditionally, crypto investors have emphasized Bitcoin’s role as a store of value during inflationary periods. However, the current situation, where rising inflation leads to expectations of rate hikes, is temporarily reducing the appeal of cryptocurrencies. Especially in a structure where inflation is linked to policy rates, the market is being forced to readjust its bets on disinflation.

As emphasized by the researchers, the current policy risk is not about easing too early but about acting excessively cautiously without recognizing structural changes. Amid this uncertainty, markets have begun to price in inflation scenarios in advance, which is reflected in recent cryptocurrency weakness and rising bond yields.