Bitcoin's (BTC) inflation hedge narrative is being put to the test as U.S. consumer prices cool, market sentiment sits near record lows, and the cryptocurrency trades 47% below its October all-time high.
Bitcoin entrepreneur Anthony Pompliano said that holders now face a harder question: whether they can stay convicted without daily inflation pressure reinforcing their thesis.
"Can you hold an asset when there is not high inflation in your face on a day-to-day basis?" Pompliano said on Fox Business. "Can you still believe in what Bitcoin's value proposition is, which is that it's a finite-supply asset."
What the Data Shows
The U.S. Consumer Price Index fell to 2.4% in January from 2.7% in December, the Bureau of Labor Statistics reported on Friday. Core CPI dropped to 2.5%, its lowest reading since April 2021.
But the number comes with a significant caveat. A 43-day government shutdown last fall prevented federal statisticians from collecting October price data. Moody's chief economist Mark Zandi told CNBC that inflation "looks better on paper than in reality," estimating the CPI would be closer to 2.7% without that data gap.
Bitcoin traded at roughly $68,900 on Saturday, up about 3.5% on the day but down around 28% over the past 30 days.
Read also: Bitcoin Still 20% Above Its 'Ultimate' Bear Market Bottom, CryptoQuant Warns
Sentiment at Historic Lows
The Crypto Fear & Greed Index, which aggregates volatility, momentum, and social data into a single score, posted a reading of 9 on Saturday - deep in "Extreme Fear" territory.
The index hit an all-time low of 5 on Feb. 6, during a week when bitcoin briefly dropped below $61,000 and more than $2 billion in leveraged positions were liquidated.
The U.S. dollar index, meanwhile, has weakened about 2.3% over the past month and trades near 97, its lowest level in over a year.
Pompliano's 'Monetary Slingshot' Thesis
Pompliano, the founder and CEO of Professional Capital Management, argued that short-term deflationary forces will eventually lead policymakers to print more money and cut rates - quietly devaluing the dollar. He called this a "monetary slingshot" that would make bitcoin "more valuable than ever."
That thesis remains speculative and rests on policy outcomes that are uncertain. The Federal Reserve has not cut rates since last year, and markets currently price two 25-basis-point reductions for 2026, one in June and another in September.
For now, bitcoin holders face a market defined by falling prices, record-low sentiment, and a cooling inflation backdrop that weakens the asset's most popular narrative.
Read next: Chainlink's Sergey Nazarov Joins 35-Member CFTC Panel Dominated By Crypto Executives