Stagflation Crisis Returns? An In-Depth Analysis of the Impact and Opportunities of Stagflation on the Cryptocurrency Market in 2026

The ghost of stagflation—simultaneous economic stagnation and inflation—is hovering over the global macroeconomy, and the cryptocurrency market, as a risk detector, has already sounded the alarm. Stagflation, a term originating from the 1970s oil crisis, is once again becoming a hot topic among investors as signals of slowing US GDP growth, a weak labor market, and stubborn inflation emerge.

For you and me in the crypto industry, stagflation is not just a macroeconomic concept but a key variable that could directly impact the direction of digital asset prices.

01 The Essence of Stagflation: When Economic Stagnation Meets Inflation

Stagflation is an economic concept referring to a situation where economic stagnation, high unemployment, and high inflation coexist.

The term was first introduced by British politician McLoughlin in 1965 but gained global attention during the oil crisis from 1973 to 1975.

In traditional economic theory, inflation and recession are often considered mutually exclusive; however, stagflation defies this understanding.

Understanding the causes of stagflation hinges on recognizing two main factors: first, negative supply shocks reducing economic capacity, such as rising production costs during the oil crisis; second, inappropriate economic policies, such as central banks allowing excessive money supply growth or governments over-regulating markets.

Economists analyzing stagflation in the 1970s typically attributed it to a combination of soaring oil prices and overly stimulative monetary policies by central banks, creating a vicious cycle of rising prices and wages.

02 Historical Warnings: 1970s Stagflation and the 2025 Market Preview

Looking back, the most well-known case of stagflation occurred in the 1970s. During that period, OPEC imposed oil embargoes on several countries, causing oil prices to surge over 300%, triggering a global economic crisis.

Meanwhile, the US abandoned the gold standard, further exacerbating inflationary pressures. The simultaneous occurrence of slowing economic growth, high unemployment, and persistent inflation created an economic scenario previously thought impossible by economists.

The tariff disputes of 2025 have provided a micro-preview of stagflation’s impact on the crypto market. Gate’s analysis reports that Trump administration’s tariff policies have become one of the most important macro narratives in the crypto market.

Especially in October 2025, the market experienced a flash crash due to fears of a 100% tariff on Chinese imports, with Bitcoin dropping over 16% in a single day, and major exchanges witnessing forced liquidations totaling up to $19 billion in a single day.

03 Market Transmission: How Does Stagflation Risk Affect Crypto Asset Pricing

The impact of stagflation on the crypto market mainly propagates through several key channels. First, in a stagflation environment, central banks often face a dilemma: tightening policies to curb inflation may further weaken economic growth; easing policies to stimulate the economy may worsen inflation.

This policy dilemma directly affects market liquidity and risk appetite, and as a high-risk asset, cryptocurrencies are particularly sensitive to liquidity changes.

Gate’s research indicates that factors like tariff policies that could trigger stagflation influence Bitcoin through five core channels: growth, inflation, liquidity, risk sentiment, and volatility. The most concerning scenario for the market is the “stagflation” risk—weak growth limits corporate profits, while high inflation constrains central banks from using loose monetary policy to stimulate the economy.

In this macro context, valuations of risk assets tend to come under significant pressure. Economic data from April 2025 already showed early signs of this risk: US GDP unexpectedly declined by 0.3%, while inflation indicators remained high, causing Bitcoin to briefly fall below $94,000.

04 Token Analysis: Divergent Performance of Different Crypto Assets in a Stagflation Environment

In a potential stagflation scenario, different crypto assets may exhibit divergent performances. Bitcoin, often called “digital gold,” with its scarcity and decentralization features, is viewed by some analysts as a hedge against inflation.

Historical data shows that after the US and China reached a temporary tariff truce in May 2025, Bitcoin surged back above $100,000, demonstrating strong resilience when markets are overly sold off and policy signs ease.

Ethereum, as the second-largest cryptocurrency by market cap, has a high correlation with Bitcoin but generally exhibits higher volatility (higher beta).

During periods of rising stagflation concerns, this characteristic may lead to greater price swings. Ethereum’s unique smart contract capabilities and ecosystem applications mean its long-term value narrative differs from Bitcoin’s, but in the face of short-term macro shocks, both assets often move in similar directions.

Other altcoins may face greater challenges in a stagflation environment. These assets typically have higher betas, and their prices may fall far more than Bitcoin and Ethereum during market downturns.

Investors should exercise caution with these assets, especially as market uncertainty intensifies.

05 Investment Strategies: How to Adjust Your Crypto Portfolio During Stagflation

In the face of potential stagflation risks, investors need to adjust their strategies to adapt to changing market conditions. Monitoring macro policy signals becomes crucial. The Gate report emphasizes the importance of closely watching announcements from the US Trade Representative, high-level diplomatic interactions between China, Europe, and the US, and key industry developments.

These policy trends often precede market reactions and can provide clues for risk event anticipation.

Risk management strategies require reassessment. Before major policy decision windows, it’s prudent to reduce leverage and increase margin buffers to prevent a repeat of the liquidation wave seen in October 2025.

Investors should understand the market logic at different stages: during the initial “risk aversion” phase triggered by stagflation fears, cash or short-term government bonds may be safer havens; when markets are overly sold off and policies show signs of easing, Bitcoin often demonstrates strong rebound resilience.

Diversification becomes a key defensive measure. Besides adjusting holdings of Bitcoin and Ethereum according to risk appetite, investors might consider allocating part of their funds to less macro-correlated crypto assets or exploring DeFi stablecoin yield strategies to enhance portfolio resilience.

Future Outlook

As of January 13, 2026, on the Gate platform, Bitcoin has recovered from its November 2025 lows, trading in the $90,000 to $95,000 range. Ethereum remains oscillating above its key support levels, reflecting high sensitivity to macroeconomic signals.

As demonstrated by the 2025 tariff disputes, the linkage between global trade policies and the crypto market is becoming increasingly tight.

The cryptocurrency market is shifting from an experimental fringe to a macroeconomic barometer. The stagflation risk—this Damocles sword hanging over the global economy—has become an indispensable variable in digital asset pricing models.