Signs of stagflation in the US economy are attracting attention again. Stagflation is defined by the simultaneous occurrence of high inflation and a weak labor market. Recently rising oil prices due to geopolitical reasons and worse-than-expected employment data have strengthened these concerns. In the February employment report, there was an employment loss of 92 thousand people in the country, while the unemployment rate increased to 4.4 percent. The increase in energy prices and the weakening labor market increased economic uncertainties.
Historical Parallels in the Economic Outlook
The last period when stagflation was seriously felt was the 1970s. The oil shocks experienced at that time brought inflation to double digits in the USA and also increased unemployment. Paul Volcker, head of the US Federal Reserve in those years, increased interest rates to almost 20 percent to control inflation, and as a result of these steps, both inflation and economic growth declined rapidly. Whether a similar scenario will occur today has become the focus of financial markets.
Bitcoin’s Response to Macroeconomic Fluctuations
In the case of the cryptocurrency market, Bitcoin’s attitude towards economic shocks is also discussed. In 2022, while the US Federal Reserve was rapidly increasing interest rates and inflation remained high, Bitcoin and technology stocks lost sharp value. At that time, Bitcoin showed mostly risky asset behavior; failed to highlight its safe harbor status.
But in 2023, when the banking crisis broke out in the US and financial stability concerns became evident, demand for Bitcoin became stronger again. The crypto asset increased by nearly 80 percent in dollar terms during this period. Thus, Bitcoin’s behavior during periods of macroeconomic stress varied depending on which factor was at the forefront.
Structural Changes in Bitcoin Supply
Julio Moreno, research director at KriptoQuant, shared a long-term chart of Bitcoin’s annual inflation. This chart tracks the change in Bitcoin supply across different investor groups from 2010 to 2026. The supply in circulation and annual inflation movements are shown on the chart with different colored lines. Issuance inflation causes supplies held by long-term investors and early-stage owners to steadily decline over time.
As a result of reward halvings that occur every four years, new Bitcoin entry into the market is further restricted. The chart reveals that the base for total supply growth has been gradually narrowing since 2010, and this trend continues until 2026. In the same period, it is emphasized that the price of Bitcoin has increased significantly in the long term.
The main point here is that Bitcoin is systematically becoming more constrained in supply. This structure contrasts with central banks being able to offer more liquidity to the market if traditional currencies remain under inflation.
Limits of the Limited Supply Argument
Data provided by CryptoQuant shows that Bitcoin’s algorithmically determined scarcity feature continues. Halvings continue this system sharply. Additionally, accumulation by long-term investors reduces the active supply in the market. However, this dynamic may not be fully reflected in pricing in the first phase of stagflation.
As in 2022, the general liquidity contraction in the market pulls down all risky classes together. Bitcoin’s scarcity argument can be effective only when liquidity-related crises come to the fore.
