The market is currently in a macro adjustment stage dominated by inflation repricing. If Bitcoin had continued to follow the Nasdaq's trajectory, its current theoretical price should be close to $140,000. However, since October 2025, the divergence between the two has begun to widen significantly. The core reason behind this lies in the resurgence of US inflation, prompting a reversal in market expectations regarding the path of interest rate cuts.
Latest data shows that US CPI has risen from the previous 2.4% to 3.8%, while PPI has increased from 2.9% to 6.0%. Simultaneously, the interest rate market is gradually withdrawing some of its pricing for rate cuts in 2026. For Bitcoin, the expectation of loose liquidity that previously supported its rally is beginning to weaken. Meanwhile, escalating tensions in Iran have driven oil prices up by approximately 40% since late February 2026, with rising energy costs further intensifying market concerns about inflation.
Based on current pricing, the market still tends to view this round of inflation as a temporary pressure disturbance. However, as the interplay between energy, interest rates, and risk appetite strengthens, the market is also beginning to reassess the risk of a prolonged high-interest-rate environment. During this process, Bitcoin's performance has started to noticeably underperform that of tech stocks, which can benefit from nominal inflation.
Inflation Repricing: Why Bitcoin Struggles to Benefit from a High-Inflation Environment
Most investors often equate "monetary expansion" with "inflation," but they actually correspond to entirely different market phases. Over the past few years, a key driver for Bitcoin's rise has essentially been loose liquidity and expectations of rate cuts, rather than inflation itself. In December 2022, the BIT model already pointed to a significant easing of price pressures and signaled that central bank policies might subsequently turn toward releasing rate cut signals. This also became a crucial starting point for the rally in tech stocks and Bitcoin from 2023 to 2025.
The problem, however, is that when inflation genuinely begins to resurface, market logic changes. Even before actual rate hikes materialize, mere expectations that "interest rates will remain higher for longer" are enough to trigger a repricing of Bitcoin. As a typical long-duration asset, Bitcoin is highly sensitive to the interest rate path; once rate cut expectations are withdrawn, its valuation tends to come under pressure.
At the same time, Bitcoin is not like stocks, which can gain structural benefits in a certain inflationary environment. Stocks may benefit not only from rising nominal corporate revenues but also potentially from a reduction in the real burden of debt. Bitcoin, on the other hand, has neither debt that can be diluted by inflation nor cash flows that can expand with inflation, making it difficult to benefit directly from this round of rising inflation. This also explains the recent pronounced divergence between the Nasdaq and Bitcoin.
From Energy Shock to Rate Constraints: The Market Begins Reassessing the Liquidity Path
The issue the market is truly concerned about now is not just "whether inflation is rising," but whether high inflation will force the Federal Reserve to keep interest rates elevated for an extended period. The BIT model forecasts that US CPI could potentially rise further to 6.0%. If this scenario materializes, Bitcoin may experience periodic pullbacks around the release of each CPI and PPI data point.
Meanwhile, while the crude oil futures curve indicates that oil prices will gradually decline in the future, they are unlikely to return to the pre-conflict level of around $63 in the short term. The market has already priced in a long-term premium of approximately 15% in oil prices, reflecting genuine supply bottlenecks. Starting from the current price of around $101 per barrel, the market expects oil prices to fall to $89 by September 2026, to $80 by January 2027, and further to $73 by January 2028.
Beyond geopolitical and energy factors, the expansion of AI infrastructure may also be altering the inflation path the market had previously grown accustomed to. Data center construction, power demand, and infrastructure capital expenditures are continuously pushing up energy pressures. This suggests that inflation may remain above target levels for longer than previously anticipated by the market. In such an environment, tech stocks can benefit from order growth and improved earnings expectations, while Bitcoin is more susceptible to pressure from high-interest-rate conditions.
Overall, the core of this market shift is not a breakdown of Bitcoin's long-term logic but rather a reassessment of the interest rate and liquidity path as inflation resurfaces. In the short term, the high-inflation environment may continue to suppress Bitcoin's performance, causing it to underperform the Nasdaq periodically. However, this does not signal a market shift towards bearishness; more accurately, it merely slows Bitcoin's upward momentum. As the market begins to price in expectations of renewed liquidity easing in the future, Bitcoin may still regain support.
Some of the above viewpoints are from BIT on Target. Contact us to obtain the full BIT on Target report.
Disclaimer: Markets involve risks, and investments require caution. This article does not constitute investment advice. Trading digital assets can be extremely risky and volatile. Investment decisions should be made after careful consideration of personal circumstances and consultation with financial professionals. BIT is not responsible for any investment decisions based on the information provided in this content.
