How Cooling Inflation Historically Affects Bitcoin Narratives And...

Inflation sits at the center of modern economic cycles. When inflation is high, central banks raise interest rates, reduce liquidity and push investors toward safer assets. When inflation falls, liquidity usually improves, risk appetite returns and markets start to focus on future growth.

In this environment, Bitcoin (BTC) serves two distinct purposes:

A store of value, supported by its fixed supply and predictable issuance schedule.

A high-risk technology asset strongly influenced by liquidity, market sentiment and broader risk cycles.

Periods of cooling inflation often mark the point where these two objectives mix or compete, depending on the stage of the cycle.

An analysis of historical market cycles helps show how declining inflation rates influence Bitcoin’s price and volatility.

Following Bitcoin’s first major price surge in 2013, global inflation declined, and risk appetite weakened. The cryptocurrency entered a long consolidation period. Investors began exploring Bitcoin as a potential long-term store of value similar to gold. Price movement was slow, but the foundational narrative grew stronger.

After the 2017 peak, inflation cooled, and central banks tightened policy. Bitcoin stayed range-bound through much of 2018-2019, yet important developments took place:

US financial institutions began researching Bitcoin as a non-correlated portfolio hedge.

Custody services and futures markets were launched.

Source: CoinTelegraph