New inflation concerns threaten Bitcoin rally in 2026

A concerning research report points to a possible resurgence of inflation in the United States this year, putting pressure on the optimistic expectations of Bitcoin investors. Researchers warn that inflation could rise above 4% this year, driven by various economic factors that may have a stronger impact than previously expected.

Inflation could exceed 4% this year

Adam Posen, president of the Peterson Institute for International Economics, and Peter R. Orszag, senior executive at the financial advisory firm Lazard, present a worrying scenario in their latest analysis. They suggest that consumer prices could increase faster than many market trendsetters had anticipated.

The researchers highlight several inflationary pressures that could outweigh the cooling effects of AI productivity gains and falling housing prices. This combination could mean that inflation does not decline further this year but instead accelerates.

Trade war and labor market fueling inflationary pressures

The following factors could fuel inflation: import tariffs from the Trump era, a tightening labor market, potential migrant deportations, and large budget deficits are likely to cause price increases. Analysts at Bitunix emphasize the core point: “The real policy risk is not overly cautious policy, but rather underestimating structural disinflation effects, which ultimately lead to an abrupt adjustment process.”

Posen and Orszag explain that importers pass on the cost increases caused by import tariffs to consumers with a delay. By mid-2026, this delayed pass-through would largely be complete, potentially increasing core inflation by about 50 basis points.

Deportations of migrants could also build inflationary pressure by causing labor shortages in migration-dependent sectors, leading to wage increases and demand-driven inflation. Additionally, government deficits exceeding 7% of GDP and looser financial conditions, combined with unanchored inflation expectations, could further drive up living costs.

Federal Reserve sees less room for rate cuts

This inflation threat directly affects the plans of the Federal Reserve. Higher inflation could force the central bank to be more cautious with rate cuts than markets hope. The official inflation rate, measured via the consumer price index, was at 2.7% at the end of 2025—its lowest level since 2020.

Various investment banks expect the Fed to cut interest rates by 50 to 75 basis points this year. However, crypto investors had anticipated much more aggressive rate cuts following last year’s strong disinflation.

Bitcoin and risky assets feel the heat

Global bond yields are rising rapidly at the moment, with U.S. government bonds reaching a high of 4.31% earlier this week—its highest level in five months. These rising yields make risky investments like stocks and crypto less attractive.

Bitcoin has dropped close to 4% this week, to around $87.77K, according to current market data. The combination of inflation concerns, higher interest rates, and Fed caution undermines the bull case that crypto optimists had built earlier this year.

The projected inflation poses a headwind for those betting on a crypto boom. Instead of the rapid rate cuts and low inflation that support digital assets, a scenario of persistent price pressure and cautious central bank policies looms.