The Fed Is Worried About Stagflation: Here's Why This Analyst Says It Would Be Good For Bitcoin

• The Federal Reserve has signaled that the U.S. risks facing stagflation.
• Stagflation would benefit Bitcoin, according to Grayscale Head of Research Zach Pandl.
• Meanwhile, markets do not appear to be all that worried about stagflation at the moment.

Over the past month, the big fear has been that the U.S. could be heading for a recession amid President Donald Trump‘s tariff policy. But that may only be half of the picture. 

On Wednesday, the Federal Reserve signaled that the U.S. risked facing a particularly nasty type of recession: stagflation. 

“Uncertainty about the economic outlook has increased further,” the Fed said following its Federal Open Market Committee meeting. “The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.”

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Stagflation happens when an economy simultaneously experiences stagnant growth, rising inflation and rising unemployment. For policymakers, it is the equivalent of being placed between the devil and the deep blue sea. If they try to address growth and unemployment through economic stimulus programs, inflation shoots up. If they try to address the inflation by withdrawing liquidity from the economy, unemployment worsens.

By definition, this does not bode well for traditional equity investments. While it can be tempting to think that, as such, this would also be bad for Bitcoin, one analyst has suggested otherwise.

‘A Modern Store Of Value’

“Fed is worried about stagflation. We think that outcome would be good for Bitcoin,” Zach Pandl, head of research at leading cryptocurrency asset manager Grayscale, said on Wednesday.

Pandl cited a previous note from the firm highlighting that stagflation has historically favored scarce commodities like gold. 

“Bitcoin was not around for past stagflations but can be considered a scarce digital commodity and is increasingly viewed as a modern store of value,” he wrote on April 9.

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Pandl added that his confidence that Bitcoin could perform like gold in such an outcome has also been bolstered by recent U.S. government support of the asset. As highlighted by the analyst, U.S. Treasury Secretary Scott Bessent recently said, “Bitcoin is becoming a store of value” amid the government’s efforts to build up a strategic reserve.

Despite Pandl’s view, Bitcoin has yet to prove itself as a store of value. While there was much talk of the asset decoupling from stocks in April as it briefly broke away, VanEck said in a recent report that much of the correlation has returned.

Meanwhile, markets do not appear to be all that worried about stagflation at the moment. As of last look, traditional equities and Bitcoin are rising together while gold has been subdued. The S&P 500 is up nearly 2% on the day, the Nasdaq is up almost 2% and Bitcoin is up over 4%, trading over the $100,000 mark for the first time since February.

Analysts have largely chalked up the price action to optimism over ongoing trade negotiations between the U.S. and China. In a further signal of easing trade tensions, Trump has also announced a trade deal with the U.K., removing tariffs on aluminum and steel and reducing tariffs on car imports.

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