Pompliano says slowing inflation will test Bitcoin investor confidence.
Crypto journalist
We are there
Crypto journalist
Share
As inflation eases, bitcoin holders may be entering a different market cycle, says entrepreneur and investor Anthony Pompliano, who says the asset's core theme is now being challenged.
Key Takeaways:
Pompliano says the easing of inflation is testing the long-term conviction of Bitcoin investors.
The Bitcoin scarcity thesis depends more on the expansion of the money supply than short-term CPI movements.
Weak sentiment and macro uncertainty could weigh on prices ahead of recovery.
In an interview with Fox Business on Thursday, Pompliano argued that many investors turned to bitcoin during the initial surge in prices and high liquidity.
With inflation slowing, the real question is whether participants still believe in Bitcoin's long-term purpose.
Pompliano: Bitcoin has been tested without high inflation
“I think the challenge for Bitcoin investors is, can you hold an asset when you don't have hyperinflation in your face every day?” he said.
“He still believes what the idea of Bitcoin's value is, which is that it's a property of limited supply. If you print money, Bitcoin is higher.”
According to government data, inflation is slowing slightly. The Consumer Price Index fell to 2.4 percent from 2.7 percent in January, according to the US Bureau of Labor Statistics.
Even so, Mark Zandi, chief economist at Moody's Analytics, told CNBC that the improvement appears stronger in the statistics than the day-to-day costs that consumers face.
Bitcoin has long been touted as a hedge against currency collapse because its supply is capped at 21 million coins.
As central banks expand the money supply and weaken its purchasing power, investors move to less volatile assets, including bitcoin and gold, both of which Pompliano says are durable long-term stores of value.
Market sentiment, however, is subdued. The Crypto Fear and Greed Index recently dropped to an “Extreme Fear” reading of 9, a level not seen since June 2022.
According to CoinMarketCap, Bitcoin was trading around $68,850 at press time, down roughly 28% over the past month.
Pompliano expects macroeconomic conditions to turn turbulent before any sustained recovery begins.
He expects price pressures in the short term, followed by policy responses such as rate cuts and renewed liquidity injections.
“In the short term we're going to get deflationary forces, people are going to print money and demand an end to interest rates,” he said.
He described the volatility as a “monetary slingshot,” where inflationary shocks occur where temporary drops in prices blunt the effects.
Over time, he argued, creating more money would weaken the US dollar and strengthen rare assets.
Bitcoin slide shakes market confidence in US jobs review
Bitcoin's recent decline followed a sharp shift in economic expectations after US officials revised last year's employment data up by nearly 900,000 jobs.
While January payrolls showed a modest gain of 130,000 jobs, the large revision undermined confidence in earlier reports and volatile financial markets.
Investors overreacted to the weak headline picture and data reliability, as uncertainty weighs heavily on risk-adjusted assets.
The change quickly rippled through the markets. US Treasury yields rose, with the 10-year moving from 4.15% to 4.20%, while expectations for a March interest rate cut fell sharply from 22% to 9%.
Derivatives activity also continued to strengthen, with large traders increasing hedge positions against losses.
Analysts have pointed out that preliminary labor force estimates, including statistical models used during economic transitions, may have overstated job creation in earlier readings.
It remains a key indicator of the bond market for Bitcoin. High yields typically tighten liquidity conditions, making it difficult to recover speculative assets.
Although some traders believe that prices may be closer to the bottom, the current market behavior suggests hesitation.
Trending news, recommended popular crypto topics, price predictions
