Inflation Rate Surpasses Expectations in 2025: Bitcoin Bulls' Hopes Diminished

The analysis presented by Adam Posen, President of the Peterson Institute, and Peter R. Orszag, lead figure at Lazard, reignited concerns about the inflation rate issue in the United States in 2025. In fact, the possibility of the inflation rate exceeding 4% has profoundly shaken the bullish predictions in the crypto market that prices will be brought under control.

What Factors Are Behind the Rising Inflation Rate?

The main factors contributing to increased inflationary pressure throughout 2025 have been identified through economist warnings. The costs associated with import restrictions during the Trump era, tightening labor markets, and labor shortages caused by immigrant deportations are cited as the primary sources of price increases.

The combination of these factors risks overshadowing the productivity gains expected from artificial intelligence and declining housing inflation. As emphasized in research notes, cost increases stemming from tariffs may take time to be reflected in consumer prices within the supply chain; however, this transition is expected to be largely completed by mid-2026.

Large fiscal deficits resulting from government spending and easing financial conditions also strengthen upward pressure on inflation. According to Posen and Orszag, these pressures outweigh the downward effects—particularly ongoing declines in housing prices and productivity increases.

Central Bank’s Rate Cut Moves Miss Expectations

Rising inflation expectations directly influence the Federal Reserve’s monetary policy decisions. Many investment banks forecast that the Fed will cut interest rates by 50-75 basis points in 2025. However, crypto bulls have analyzed a more aggressive rate cut.

The rising inflation rate situation prevents the Fed from lowering borrowing costs as quickly as market expectations. Analysts at Bitunix crypto exchange summarized the current real risk as follows: if structural deflation does not settle in, a difficult balance must be struck between remaining very cautious or easing prematurely. This could trigger a more sudden economic adjustment process.

Rising Treasury Yields Hit Risky Assets

Concerns over rising inflation rates have translated into yield increases in the global bond markets. The 10-year US Treasury yield surged to 4.31%, reaching its highest level in five months. This development significantly reduced the appeal of Bitcoin and other risky assets.

Bitcoin (BTC) lost nearly 2.16% last week, falling to $88,010. This decline occurred in direct proportion to rising bond yields. High-yield bonds are becoming a safer haven for investors, while crypto assets—under expectations of falling inflation and rate cuts—have lost their appeal.

Bitcoin: Not a Safe Haven in the Dollar Geography

The role of Bitcoin as an inflation hedge has begun to be questioned throughout 2025. Despite the US dollar’s depreciation, Bitcoin has not recorded a concurrent rise with this trend. JPMorgan strategists attribute the dollar’s weakness to short-term liquidity flows and market sentiment, not structural macroeconomic changes.

Markets view the current dollar decline as a temporary change in sentiment rather than a permanent macroeconomic shift. In this environment, Bitcoin has been functioning as a risk asset sensitive to liquidity rather than as an inflation hedge. Gold and emerging markets have emerged as more reliable tools for dollar diversification.

Conclusion: How Did the Inflation Rate Change in 2025?

The fact that the inflation rate exceeded expectations for 2025 has fundamentally shaken the predictions of Bitcoin bulls. The likelihood of continued price increases, a slowdown in rate cuts, and diminished appeal of risky assets have challenged the crypto market, which is dependent on central bank policies. During this period, Bitcoin and the broader crypto portfolio have continued to be viewed as volatile risk assets rather than reliable hedge tools.