The stagflation risk that the FRB is wary of may become bullish material for Bitcoin: Analyst | CoinDesk JAPAN

! Fed warns of stagflation risks, could be bullish for bitcoin: analysts

• BTC is trading above $96,000 following the Fed’s decision on the 7th, with a 1.6% increase over the past 24 hours, while XRP, AVAX, and UNI recorded slight declines.
• The FRB’s policy statement highlights the increasing risks of inflation and unemployment, often associated with stagflation.
• According to Grayscale’s Zach Pandl, BTC may benefit from this scenario.

The Federal Reserve Board (FRB) is increasing its vigilance against the risk of stagflation. This is a situation where slowing growth and rising inflation coexist uneasily, posing challenges for policymakers.

Chair Jerome Powell asserted that the economy is in a “good state” and emphasized that the Fed is in a position to “wait and see” before a policy shift; however, the subtle changes in the central bank’s policy statement suggest a growing concern about the direction of the economy.

On the 7th, the FRB kept the policy interest rate unchanged and acknowledged the rising risks of inflation and unemployment. This closely aligns with the definition of stagflation that occurred during a significant part of the 1970s. In this scenario, the FRB’s policy space to stimulate a weakening economy without further fueling inflation will be limited.

“The FRB is concerned about stagflation,” said Zach Pandl, the head of research at Grayscale, in a post on X after this decision. “I believe this outcome is good for Bitcoin (BTC).”

Mr. Pandl previously stated in a report that raising tariffs could be a factor in stagflation. Historically, stagflation has hit traditional assets hard, while benefiting rare stores of value like gold. “Bitcoin did not exist during past stagflation periods,” he noted, adding, “but it can be considered a rare digital commodity and is increasingly recognized as a modern store of value.”

Market reaction after the Fed announcement

Following the announcement from the FRB and comments from Chairman Powell, Bitcoin traded within a narrow range. Driven by an optimistic outlook on the US-China trade talks, it briefly reached $97,500 early on the 7th, but then pulled back to $96,500, marking a 1.6% increase over the past 24 hours.

The CoinDesk 20 Index (CD20), a benchmark for the broad cryptocurrency market, was pushed down by a 1-3% decline in XRP, AVAX, UNI, NEAR, and AAVE, resulting in a slight 0.3% increase during the same period.

On the other hand, the stock market gradually recovered from a temporary decline, with the S&P 500 and Nasdaq rising by 0.4% and 0.3% respectively to close the trading.