U.S. inflation pressures surge again, posing new challenges for the crypto market and Bitcoin

According to the latest research by the Peterson Institute for International Economics and Lazard, US inflation is re-emerging as a pressure in the American economy. This report, jointly authored by Adam Posen and Peter Osagie, warns that consumer prices may exceed 4% in 2025, sharply contrasting with the previous optimistic outlook in the cryptocurrency market regarding inflation easing and the Federal Reserve cutting interest rates.

For Bitcoin investors, this inflation forecast undoubtedly rings alarm bells. Once, bullish investors bet that easing inflation pressures in the US would lead to aggressive rate cuts by the Fed, thereby boosting risk assets like Bitcoin. However, this logic now faces significant tests.

Multiple Factors Drive Up US Inflationary Pressures

The two economists point out that factors such as import tariffs during the Trump era, tight labor markets, immigration deportation policies, large fiscal deficits, and loose financial conditions are sufficient to offset the productivity gains from artificial intelligence and the moderation of housing sector inflation.

Of particular interest is the transmission mechanism of import tariffs. Importers often experience cost pass-through delays—they gradually transfer tariff costs to end consumers. This lag effect smooths short-term inflation fluctuations, but if tariff policies remain unchanged, upward pressure on consumer prices will gradually emerge in the medium term. According to research forecasts, by mid-2026, the cost pass-through of tariffs should be largely complete, potentially adding about 50 basis points to core inflation levels.

Tight labor markets should not be overlooked either. Large-scale immigration deportation expectations are expected to cause labor shortages in industries reliant on immigrant workers, pushing up wage growth and triggering demand-driven inflation. Additionally, the US fiscal deficit could expand to over 7% of GDP, further easing financial conditions, and unanchored inflation expectations remain potential forces pushing prices higher.

Inflation Expectations Challenge Federal Reserve Decisions

Official inflation indicators have fallen to 2.7% in 2025, reaching their lowest point since 2020. This initially sparked market expectations for the Fed to actively cut rates—some investment banks forecast a 50 to 75 basis point cut this year, and cryptocurrency supporters even envision more aggressive policy shifts.

However, the warnings in the research report suggest that the Fed’s room for rate cuts may be seriously overestimated. If US inflationary pressures truly resurface, the Fed will face more cautious policy choices—precisely what risk asset investors do not want to see. As Bitunix analysts observe: “The current policy risk is not about easing too early, but about being overly cautious in the face of a structural downward trend in inflation, which could ultimately lead to more intense subsequent adjustments.”

Rising Bond Yields Impact Crypto Markets

The anticipated effects are already evident in the global bond markets. The US 10-year Treasury yield recently hit a five-month high of 4.31%, and Japanese government bond yields also reached new highs. This signal is not a good omen for crypto assets.

As bond yields rise, low-risk fixed income assets like Treasuries become more attractive to investors, leading to capital outflows from stocks and high-risk assets such as cryptocurrencies. Bitcoin’s price dropped to around $77,560 this week, down over 6% in 24 hours, directly reflecting the impact of this market trend.

For the crypto market, the re-emergence of US inflation pressures means that the previous “rate cut-driven growth” expectations need to be reassessed. The return of inflation stickiness will force market participants to rebalance risk asset allocations, and during this adjustment, volatility in assets like Bitcoin may further increase.