Fidelity’s crypto experts are predicting that a potential surge in inflation by 2025 could actually be good news for Bitcoin.
Stagflation and Bitcoin’s Potential
According to Chris Kuiper, director of research at Fidelity Digital Assets, persistent inflation and government budget shortfalls might push the US into stagflation. This economic scenario is a tough mix of slow economic growth, high inflation, and potentially high unemployment.
Kuiper points out that Bitcoin’s performance would depend heavily on how the government responds to stagflation. If the response involves increased government spending or monetary easing to boost the economy, Bitcoin could potentially thrive, although possibly with a delay. However, if the focus shifts to aggressively curbing inflation by reducing the money supply and government spending, Bitcoin might struggle.
Historical Parallels and Future Outlook
Kuiper notes that gold prices soared during a period of high inflation in the 1970s and 80s. He suggests that Bitcoin could offer similar portfolio benefits across various economic scenarios. For example, a recession would likely trigger more government stimulus, historically beneficial for Bitcoin. Similarly, if other investments perform well alongside continued high inflation, Bitcoin is also expected to do well.
Bitcoin would only face significant headwinds if there’s a dramatic cut in government spending and a reversal of money creation. However, Fidelity believes this is unlikely given the current high levels of government debt.
Disclaimer: This information is for general knowledge and shouldn’t be considered investment advice. Always do your own research before investing in anything.
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