Bitcoin jolted by inflation pressure, but monetary expansion supports long-term case

Renewed concern over US inflation could weigh on Bitcoin in the near term as markets reconsider the prospect of higher interest rates. Over the longer run, however, fiscal strain and monetary expansion strengthen the case for holding the cryptocurrency.

Speaking on Yahoo Finance on Oct. 14, crypto analyst Scott Melker said investors should look beyond short-term market swings driven by economic releases and focus on the likelihood that the government will ultimately expand the money supply.

US headline consumer prices rose 0.6% in September from the previous month and 3.7% from a year earlier. Core CPI increased 0.3% month over month and 2.6% annually. Expectations called for headline readings of 0.6% monthly and 3.6% annually, with core inflation at 0.2% on the month.

A 9.1% increase in gasoline accounted for more than half of the monthly headline gain. Shelter, used vehicles, apparel and transportation services also became more expensive. Melker noted that inflation remains far from the 2% target, while markets tend to react more to deviations from forecasts than to the absolute level of inflation.

Interest-rate expectations shifted quickly after the data. Melker said softer inflation and employment readings had recently fueled discussion of rate cuts, but the latest figures revived expectations for another increase. Markets assigned a 63% probability to unchanged rates at the October 2026 meeting and about a 38% probability to a 0.25-percentage-point increase.

Melker said consumers are generally more concerned about the prices they encounter in stores than whether an inflation gauge stands at 2%, 2.5% or another level. Changes in the cost of gasoline and food from one month to the next have a more immediate impact on households.

Bitcoin may decline alongside other risk assets in the short term as expectations of tighter policy return, he said. The longer-term argument for the asset rests on the view that the government will eventually resort to issuing more money as financial pressures build.

Melker cautioned against focusing too heavily on individual economic releases and the market reactions they trigger. In his view, recurring uncertainty over inflation, policy and currency debasement is itself part of the long-term rationale for holding Bitcoin.