No one dared to talk about the potential of stagflation, the dreaded word representing Portmanteau on stagnation and inflation, at the World Economic Forum in Davos early this year despite the threatening Trump -duty and trade war.

However, investors have recognized the S-Word risk, which has led to the outlets of stagflation-bound strategies in relation to buy-and-team Bitcoin and S&P 500.

From last week, Goldman Sachs ‘”Stagflation Basket”, which focuses on strength in raw materials and defensive plays such as health care and shorts on consumers’ discretionary, semiconductors and unpaid tech shares, almost 20% for the year.

The S&P 500, Wall Street’s Benchmark Equity Index, has fallen 4% this year with Bitcoin, the leading cryptocurrency with market value, down 10% per year. Data source trading and Coindesk.

The International Monetary Fund defines stagflation as a situation where high inflation coincides with economic stagnation, high unemployment and a general decrease in economic activity.

“It seems that the shares and bond prices are adjusted for lower growth and higher inflation [stagflation] “Although there are other factors that are at work here – for example, healthcare is likely to benefit from the promise of deregulation that offsets derogatory cuts in direct financing,” Noelle Acheson, author of Crypto, told Macro Now Newsletter, to Coindesk.

Stagflation mumbling has been heard since the beginning of 2022, but the markets have begun to price the same this year, mainly because of Trump’s duty and the escalating merchant stresses.

Forward inflation measurements such as two-year-old and five-year-old swaps rose to perennial heights, a sign of fear of a trade war that makes consumer products. Meanwhile, a key section of the Treasury Market yield turned recently to inversion and signaled a recession ahead. Several real-time GDP trackers, such as Atlanta Fed’s GDP, have signaled a sharp contraction in economic activity.

BTC failed as digital gold?

A potential stagflation is a perfect situation for assets with the perceived store with value appeals such as Bitcoin to shine. Note that gold has received 13% this year.

However, the Bull Case in Cryptocurrency, suggested by its proprietors for years, has not realized. In fact, BTC’s connection with US equities has been strengthened over the past few weeks.

This does not necessarily mean that BTC is no longer a safe port, according to Noelle Acheson, author of the popular crypto is macro now newsletter.

“BTC is short-term a risk asset with prices set by the last short-term trade-long-term, it’s a safe garden given its verifiable hard cap and global utility-these days, The Market is in a risk-off mood, so macro portfolios are lighthtening positions, and we have yet to see the new inflows necessy to Get the Next Leg of Its Run Going – This Could Take Some Time, As Uncertainty Is High For Both Professional Investors and Retail, “noted Acheson.

She explained that the wind remains intact and when the market is first adapted to the new economic landscape, inflow to the crypto market will probably resume.

“The gap remains intact, with education spread, new institutional services that come online and jurisdictions around the world that compile regulatory frameworks that institutions will be comfortable with (and through them, Mainstream Detail),” Acheson said.

Stagflation wrong price

Markus Thielen, founder of 10x research, offered a slightly different roof where he said the market is wrong by reading the situation as stagflation.

“What we are likely to see is a front load of customs impacts that drive a temporary increase in commodity needs that should fade in the coming months. In addition, uncertainty about DOGE about the growth expectations,” Thielen told Coindesk.

He added that a potential Dovish tone from Fed later this week could revive a bullish mood in risk assets, including BTC. Last week, Trump stopped a plan to double US tariffs on Canadian steel and metal imports to 50%. Fed is set to announce its rate review on Wednesday.

“Recent comments from Trump suggesting a potential softening of aggressive trade policies combined with a possible mildly Dovish tone from Fed this week could set the scene for a rebound in growth -oriented assets. Historically, the rate of prolonged stagflation rarely noted a winning strategy in the last 40 years,” Thielen noted.