Pompliano Says Cooling Inflation Tests Bitcoin Investors’ Conviction

What Happened

Bitcoin holders may be entering a different phase of the market cycle as inflation eases, according to entrepreneur and investor Anthony Pompliano, who says the asset’s core thesis is now being challenged.

Pompliano says easing inflation is testing Bitcoin investors’ long-term conviction.

In an interview with Fox Business on Thursday, Pompliano argued that many investors first turned to Bitcoin during a period of rising prices and aggressive monetary expansion.

“I think the challenge for Bitcoin investors, can you hold an asset when there is not high inflation in your face on a day-to-day basis?” he said.

When central banks expand liquidity and weaken purchasing power, investors often move toward scarce assets, including Bitcoin and gold, both of which Pompliano described as durable long-term stores of value.

Market Context

Weak sentiment and macro uncertainty may pressure prices before a potential recovery.

Government data shows inflation cooling modestly. The Consumer Price Index slowed to 2.4% in January from 2.7% a month earlier, according to the US Bureau of Labor Statistics.

Bitcoin has long been promoted as a hedge against currency debasement because its supply is capped at 21 million coins.

Market sentiment, however, has deteriorated. The Crypto Fear & Greed Index recently dropped to an “Extreme Fear” reading of 9, a level not seen since June 2022.

Bitcoin was trading near $68,850 at publication, down roughly 28% over the past month, according to CoinMarketCap.

He anticipates deflationary pressures in the short run, followed by policy responses such as rate cuts and renewed liquidity injections.

He described the dynamic as a “monetary slingshot,” where currency devaluation occurs while falling prices temporarily obscure its effects.

Bitcoin Slides as US Jobs Revision Shakes Market Confidence

While January payrolls showed a modest gain of 130,000 positions, the large adjustment undermined confidence in earlier reports and unsettled financial markets.

Why It Matters

Pompliano expects macroeconomic conditions to create turbulence before any sustained recovery.

Bitcoin’s recent decline followed a sharp shift in economic expectations after US authorities revised last year’s employment data lower by nearly 900,000 jobs.

Details

Key Takeaways:

Bitcoin’s scarcity thesis depends more on money supply expansion than short-term CPI moves.

With inflation slowing, he said, the real question is whether participants still believe in Bitcoin’s long-term purpose.

Pompliano: Bitcoin’s Case Tested Without High Inflation

“Can you still believe in what Bitcoin’s value proposition is, which is that it’s a finite-supply asset. If they print money, Bitcoin is going higher.”

Even so, Moody’s Analytics chief economist Mark Zandi recently told CNBC that the improvement appears stronger in statistics than in everyday costs faced by consumers.

“We’re going get deflationary-type forces in the short term, people are going to ask to print money and to drop interest rates,” he said.

Over time, he argued, additional money creation would weaken the U.S. dollar and strengthen scarce assets.