As the world economy transitions into a new phase characterized by “reflation,” some experts suggest that this development could foster a favorable climate for Bitcoin (BTC).
Following a period of declining inflation, indicators from both commodity and currency markets imply that price pressures might be on the rise once more.
André Dragosch, who serves as the Research Director at Bitwise Europe, noted that trends in commodity and foreign exchange markets point towards an impending global reflation. Reflation refers to the reversal of diminishing inflationary pressures, leading to an increase; this phenomenon typically coincides with climbing commodity prices, depreciating currencies, and expansive monetary policies.
Dragosch observed that there is a notable shift in capital from US Treasury bonds towards commodities. In fact, gold has reached unprecedented heights while silver has surged nearly 50% since the year’s onset.
Despite gold and silver achieving record values, Bitcoin’s price has remained relatively steady. Nonetheless, Dragosch emphasizes that historically speaking, periods marked by reflation have often led to increased valuations for Bitcoin.
The analyst also posits that both the Federal Reserve and Bank of Japan may have started intervening in currency markets. This perspective aligns with views expressed by former BitMEX CEO Arthur Hayes.
In his recent analysis, Hayes indicated that if the yen weakens against the dollar concurrently with rising yields on Japanese government bonds, it could indicate eroding confidence in government debt within financial markets. In such circumstances, it is theorized that the Fed would purchase yen through dollar printing and subsequently use those yen to acquire Japanese bonds—thus expanding its balance sheet further.
However, US Treasury Secretary Scott Bessent refuted these claims. In an interview with CNBC regarding whether there was any interference from the Trump administration concerning Asian currencies he stated unequivocally: “Absolutely not. We maintain a strong dollar policy.”
*This article does not constitute investment advice.