Crypto Surges Amid Stagflation Fears as Fed Rate Cuts Loom

Despite increasing signs of stagflation, August consumer prices rose to a 2.9% annual inflation rate, and unemployment claims reached a four-year high. Still, the crypto markets remain strong. Bitcoin briefly crossed $116,000 due to expectations of a Federal Reserve rate cut on September 17, with a 94.6% chance of a 25-basis point reduction. Investors seem to favor monetary easing over economic concerns. This is evident as the S&P 500 hit all-time highs and the dollar index fell, indicating a focus on supportive policies.

Crypto analysts hold a positive view, seeing digital assets as protection against the loss of value in fiat currencies rather than as traditional risk assets. Institutional demand reinforces this belief. Public digital asset holdings now exceed $110 billion in Bitcoin, $21.3 billion in Ethereum, and $1.8 billion in Solana. Bitcoin ETFs experienced $552.78 million in inflows, while Solana’s SOL-Bitcoin ratio reached a seven-month high. This suggests strong momentum for altcoins amid growing interest from institutions.

The expected Fed rate cuts are benefiting yield-oriented tokens like Ethena’s ENA and USDe, which gain from lower traditional fixed-income yields. Hyperliquid’s HYPE token is also attracting risk-seeking investors. As disinflation is likely to resume, analysts anticipate further gains for major cryptocurrencies. This outlook is backed by institutional investments and a changing mindset among investors who see digital assets as long-term financial safeguards.