Disruptive Warning: US Inflation Projections Threaten Bitcoin Disinflation Scenario

Latest analyses from two renowned economists bring worrying news for crypto asset optimists. Adam Posen, President of the Peterson Institute for International Economics, and Peter R. Orszag, CEO of Lazard, project that inflation in the United States could surpass 4% this year—an disruptive shift that fundamentally contradicts the deflationary narrative expected by the Bitcoin community.

This projection shakes the foundation of the disinflationary bets that have been a main pillar of the bullish case for risk assets in 2025-2026. If accurate, this scenario will usher in a new era of market uncertainty, prompting the Federal Reserve to move much more cautiously in cutting interest rates than market expectations.

Factors of Disruptive Change Driving Inflation Surge

Yoshag and Posen identify a series of structural forces capable of overcoming the positive effects of AI productivity gains and falling housing costs. These factors are complex and interconnected:

Trump Era Tariffs and Delayed Cost Transmission

Protectionist tariff policies will force importers to pass increased costs onto consumers. Interestingly, the delay in the transmission process creates sustained inflationary pressure. Researchers estimate that by mid-2026, the full effects of tariffs will have been transmitted, potentially adding 50 basis points to core inflation—a significant jump not to be ignored.

Rising Labor Market Tightness and Deportation Risks

Labor market tightness will continue to exert upward pressure on wages. Meanwhile, large-scale migrant deportations could create labor shortages in certain sectors, triggering wage increases that subsequently impact broader demand-driven inflation.

Widening Fiscal Deficit and Loose Monetary Conditions

Aggressive government spending could push the US fiscal deficit beyond 7% of GDP. Along with looser financial conditions and uncontrolled inflation expectations, this combination creates a perfect storm for sustained price pressures.

Posen and Orszag firmly state: “We believe these factors collectively outweigh the downward pressure trends—namely housing inflation and productivity gains—that are the focus of consensus.”

Implications of Federal Reserve Interest Rates for Crypto Expectations

Higher inflation will make the Federal Reserve much more reluctant to cut interest rates aggressively. While some investment banks forecast a 50-75 basis point cut this year, the crypto community has placed much more ambitious hopes on a rapid easing scenario.

Analysis from the crypto exchange Bitunix captures the essence of this dilemma precisely: “The real policy risk is not easing too early, but remaining too tight after structural disinflation from AI productivity gains begins to take effect—which ultimately forces abrupt and more disruptive adjustments later on. This is why markets are already starting to price in an earlier ‘policy chase’ scenario.”

This interpretation highlights an uncomfortable reality: if the Fed is late in responding to growth slowdown, the policy adjustments needed later will be far more radical and market-shaking.

Market Response: Bitcoin and Risk Assets Under Pressure

Market data has begun reflecting this uncertainty. The 10-year Treasury yield hit a five-month high of 4.31% earlier this week, following a rise in Japanese government bond yields to record highs. This movement makes risk assets relatively less attractive.

Bitcoin responded with a 3.72% loss in the last 24 hours, with the price dropping to $86.44K from previous levels. This week’s decline reflects market repositioning towards higher and longer interest rate scenarios.

Investment Landscape: Diversifying Risks Amid Uncertainty

While Bitcoin faces challenges, some segments of the crypto market show resilient signs. Pudgy Penguins has emerged as one of the strongest NFT brands in this cycle, transforming from a speculative “digital luxury item” into a multi-vertical consumer IP platform. With user acquisition strategies through mainstream channels—toys, retail partnerships, viral media—before onboarding into Web3, this ecosystem now includes phygital products with retail sales exceeding $13M and over 1 million units sold.

In another segment, XRP shows interesting patterns. Although down about 4% this month, on-chain data indicates growing investor interest. The spot XRP ETF listed in the US has attracted net inflows of $91.72 million this month, reversing the ongoing outflow trend from Bitcoin ETFs.

Conclusion: Reassessing in an Era of Disruptive Uncertainty

If Posen and Orszag’s projections prove accurate, the crypto market is entering a new phase that requires a fundamental expectation adjustment. The scenario of higher inflation is not just a marginal risk—it’s a disruptive change that alters the entire investment calculus.

For Bitcoin investors and disinflation advocates, this projection serves as a reminder that larger macroeconomic factors continue to shape market dynamics, regardless of the favorable technological narratives.