Stealth Fed Dollar Crisis Predicted To Spark A Bitcoin Price Boom To Rival Gold #CriptoNews

Bitcoin and crypto prices have soared since the election of incoming U.S. president Donald Trump—who is plotting a bitcoin price game-changer.

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The bitcoin price has dropped back after topping $100,000 per bitcoin, sparking fears of a looming crypto market crash.

Now, as traders scramble to stay ahead of the Federal Reserve, analysts have warned of a possible Federal Reserve crisis that could spark a bitcoin price boom.

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ForbesIt Will ‘Drop’—Elon Musk Warns Doge Could Hit The Price Of Bitcoin Rival DogecoinBy Billy Bambrough

“Current inflation measures, such as consumer price index (CPI) and producer price index (PPI), are significantly lower than previous 40-year highs. However, they remain ‘stubborn’ or ‘sticky,’ resisting a return to the central bank’s preferred 2% target,” Fidelity Digital Assets research director Chris Kuiper wrote in a report that asked: “Why is no one talking about stagflation?”—defined as a combination of low economic growth and persistently high inflation.

“Combine this with continued large and structural fiscal deficits—along with a Fed that has now embarked on a rate cutting cycle—and it is not difficult to imagine inflation coming back in a second wave. If this trend continues and the outcome is anything worse than a ‘soft landing’ and a historically typical recession, it could quickly escalate into stagflation.”

U.S. debt has soared over recent years, topping $34 trillion at the beginning of 2024, with Covid and lockdown stimulus measures contributing to massive government spending and helping to send inflation spiraling out of control in 2022.

Inflation of over 10% forced the Federal Reserve to hike interest rates at a historical clip, pushing up debt interest payments and fueling fears of a “death spiral.”

Last year, Jamie Dimon, the influential chief executive of Wall Street giant JPMorgan said he wouldn’t rule out a stagflation scenario emerging, even as inflation began to come off its recent highs, while last month tech investor and podcaster Chamath Palihapitiya called stagflation one of his “key words” for 2025.

Earlier this month, analyst at the The Kobeissi Letter said they saw “more evidence of stagflation,” warning: “We have rising prices with a weakening labor market. Stagflation is here.”

On Friday, the latest U.S. job numbers showed hiring accelerated in December, smashing expectations and putting immediate plans for further Fed interest rate cuts on ice after Fed chair Jerome Powell kicked off a cutting cycle in September that continued with a further reduction in December.

“There are very real concerns over the Federal Reserve’s slower-than-anticipated interest rate cuts and this might be weighing on speculative assets like bitcoin—also this is being fueled by stronger-than-expected U.S. economic data, including robust job openings and purchasing managers index (PMI) figures,” James Toledano, chief operating officer at Unity Wallet, said in emailed comments. “This heightens fears of lingering inflation which pushes rate expectations higher and therefore limits liquidity for risk-driven markets.”

Some have also warned U.S. president-elect Donald Trump’s plans for massive tariffs and large-scale deportations of illegal immigrants could stoke further inflation.

“Also, we can’t forget that there has been massive profit-taking after bitcoin’s stellar 2024 rally, driven by optimism surrounding Donald Trump’s pro-crypto stance,” Toledano said. “Now everyone is holding their breath for Trump’s inauguration on January 20 when the expectation is that crypto will surge again—so this is very much the downturn before the storm. There is also much uncertainty over his administration’s policy rollout and this could be curbing investor enthusiasm too.”

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Forbes‘Time To Sell’—Serious Bitcoin Price Crash Warning Adds To Crypto Sell-OffBy Billy Bambrough

Traders are betting the Fed will keep interest rates on hold during its January meeting, according to CME’s FedWatch tool. In December, the Fed projected only two quarter-point rate cuts this year compared to the four it had forecast in September, referencing the economy’s strength and sticky inflation.

“If the Fed cuts rates while inflation continues to increase, it risks creating a situation of rising prices and slowing growth—a combination that could lead to stagflation,” Haider Rafique, global chief marketing officer at the bitcoin and crypto exchange XBTO, said in emailed comments in the aftermath of the Fed’s December interest rate cut. “Such a scenario would pose a significant challenge for both traditional markets and digital assets sector, as investor confidence might waver amidst uncertain economic conditions.”

This coming week, the next CPI report is expected to show inflation of 2.8% in December, up from 2.7% a month earlier, according to economists polled by Reuters.

“We think if the U.S. were to encounter a stagflation scenario, the performance of bitcoin would depend on the fiscal and monetary policy response. If fiscal and monetary institutions chose to fight the ‘stag’ part of the problem through increased spending or monetary tools, bitcoin could potentially perform well, albeit likely with another lag,” Kuiper wrote, pointing to gold’s performance through the stagflation era of the 1970s and early 1980.