After the 2023 inflation rate, a new alarm in 2025: Price pressures worry Bitcoin investors

Inflation falling to 2.7% in 2024 had given markets a breath of relief. However, new research indicates that the recovery following the 2023 inflation rate may not be permanent. Adam Posen, president of the Peterson Institute, and Peter R. Orszag, CEO of the global management consulting firm Lazard, warn that this year could be a challenging period for consumer prices. According to their studies, the cost of living in the US could rise above 4%, and this is poised to seriously undermine cryptocurrency investors’ expectations of inflation decline.

Bitcoin prices have already started to react to these warnings. Currently trading around $87,920, BTC has lost 1.75% in the last 24 hours. What is this inflationary pressure that will deeply impact markets, and where does it originate? The answer lies hidden in the new economic dynamics emerging after the 2023 inflation rate.

Experts predict inflation above 4% in 2025

According to Posen and Orszag’s analysis, neither side is experiencing favorable winds. On one hand, tariffs from Trump are beginning to be passed on to final consumers by importers. On the other hand, tightening labor markets and potential deportations of immigrants could increase employment costs. Additionally, large government expenditures and the Federal Reserve’s eased financial conditions are also creating inflationary pressures.

The combined effect of these factors could overshadow the productivity gains from AI and the housing sector downturn. Researchers concretize the issue by stating, “By mid-2026, most of the tariff transition will be completed, which could add 50 basis points to overall inflation.” Deportations could also lead to labor shortages, potentially raising wages and triggering demand-driven inflation.

From tariffs to labor markets: Factors driving inflation

Analysts also point to potential risk factors such as the government budget deficit reaching 7% of GDP, unanchored inflation expectations, and easing financial conditions. They believe that these multiple factors, especially ongoing declines in housing inflation and productivity gains from AI, will prevail over downward pressures. In other words, the recovery trend observed after the 2023 inflation rate is reversing.

For central banks, the situation becomes even more complex. The Fed cannot aggressively cut interest rates in this environment of persistent inflation. While many investment banks forecast a 50-75 basis point rate cut this year, crypto bulls expected a cut of 100 basis points or more. That expectation now seems less realistic.

Treasury yields rise, Bitcoin reacts

Inflation concerns are also manifesting in US Treasury securities. The 10-year Treasury yield reached 4.31% earlier this week, the highest in five months. This signals a new tension in the bond market, which had stabilized after the 2023 inflation rate. Bond yield studies in Japan also highlight these global pressures.

Risk assets like Bitcoin have come under pressure during this period. As Treasury yields rise, risk-free investment options become more attractive. As a result, Bitcoin has lost nearly 4% this week, falling back toward the $90,000 region. Market interest in crypto investments appears to have weakened in response to the increase in Treasury yields.

Fed intervention and market expectations

JPMorgan strategists note that the dollar’s weakness is driven by short-term flows and sentiment, and as the US economy strengthens, the dollar will stabilize. Since markets do not see the current dollar decline as a permanent macro change, Bitcoin has shifted from being a reliable dollar hedge to a risk asset sensitive to liquidity. Gold and emerging markets are emerging as preferred instruments for dollar diversification.

From 2023 to 2025: Changing inflation expectations

Since the 2023 inflation rate, markets have experienced a volatile journey. The decline to 2.7% by the end of 2024 seemed promising. However, the warning from Posen and Orszag suggests that this optimism may be premature. Crypto investors had hoped for a continued decline in inflation and subsequent aggressive Fed rate cuts. New research indicates that this scenario may not hold. Pressures from labor costs, tariffs, and government spending threaten to dampen the hopes of Bitcoin bulls. Markets need to reassess their outlook for 2025.