Signs of stagflation are reemerging in the United States, drawing attention from markets and policymakers. Defined by the simultaneous occurrence of high inflation and a weakening labor market, stagflation last made headlines amid the surging oil prices and disappointing employment data seen recently. In February, the US economy suffered a job loss of 92,000, pushing the unemployment rate up to 4.4%. Rising energy costs and the slackening job market have intensified economic uncertainty across sectors.
Historic Echoes in the Economic Outlook
The last time stagflation gripped the US so acutely was during the 1970s. Back then, major oil shocks caused inflation to soar into double digits while unemployment also climbed steadily. Paul Volcker, chair of the Federal Reserve at the time, raised interest rates to nearly 20% to rein in inflation—a move that ultimately tamed prices but also slowed economic growth sharply. Now, with similar forces in play, financial markets are once again debating whether history is set to repeat itself.
Bitcoin’s Response to Macroeconomic Shocks
Against this backdrop, Bitcoin’s behavior amid macroeconomic turbulence is under renewed scrutiny. When the Federal Reserve implemented aggressive rate hikes in 2022 and inflation remained elevated, both Bitcoin and technology stocks suffered sharp losses. During this period, Bitcoin largely acted like a risk asset and failed to demonstrate the “safe haven” qualities sometimes ascribed to it.
However, the narrative took a turn in 2023 as banking turmoil in the US revived fears over financial stability. Demand for Bitcoin surged, and the cryptocurrency jumped nearly 80% against the dollar during that time. This shift highlighted how Bitcoin’s reaction to economic turbulence can depend greatly on which macro forces are at play.
Structural Shifts in Bitcoin’s Supply
Julio Moreno, research director at CryptoQuant, shared a long-term chart illustrating annual inflation rates for Bitcoin. The chart tracks how Bitcoin supply has shifted among different investor groups from 2010 through projections to 2026, using various colored lines to show both circulating supply and annual inflation dynamics. Over time, the share of coins held by long-term investors and early adopters has steadily decreased.
The pace of new Bitcoin entering the market is increasingly restricted by scheduled “halving” events, which occur every four years. Since 2010, these halving events have steadily shrunk overall supply growth, a trend expected to continue through 2026. Crucially, this period also saw significant long-term price appreciation for Bitcoin.
At the core of the argument is Bitcoin’s systematically tightening supply structure. Unlike fiat currencies, which central banks can flood with liquidity during inflationary periods, Bitcoin’s issuance is hard-capped and algorithmically controlled.
Limits of the Scarcity Argument
Data from CryptoQuant affirms that Bitcoin continues to maintain its programmed scarcity. Halving events strictly enforce this supply discipline, while long-term investor accumulation further reduces the amount of actively traded Bitcoin. Despite these factors, Bitcoin’s scarcity might not fully shield its price in the initial phase of stagflation.
As seen in 2022, periods of broad liquidity contraction can drag down all risk assets, including Bitcoin. The scarcity narrative tends to gain traction mostly during crises rooted in financial system liquidity, rather than in stagflation’s early stages.
