Oil Inflation vs Tech Deflation: How Bitcoin Performs In The Battle

Today’s Letter Is Brought To You By BitcoinIRA ! Why just HODL when you could HODL and possibly earn more? With a BitcoinIRA account, select crypto assets like Solana (SOL) offer potential staking rewards so your crypto can keep working while you enjoy tax-deferred or tax-free* growth, depending on your IRA type. Here’s what that could look like: You invest $7,000 in Solana. With a 6% annual growth rate 1 , your balance could grow to $7,420 after one year. Add staking rewards at 6.32% , and that’s an extra $225.13 in potential earnings. Same crypto. Same IRA. Even more potential. Learn More Here To investors, I was convinced that deflation was the biggest risk to the US economy to start 2026. The deflationary forces from tariffs, deportations, AI, and robotics were driving inflation down, while the economy’s productivity soared higher. It was a central banker’s dream to have low inflation and high growth. But the war in Iran has changed the playing field. The short-term oil price shock has been well documented and it doesn’t seem to have any relief in sight. Truflation, the real-time alternative inflation metric, reported inflation at 1.65% this morning. That number is still below the Fed’s target of 2%, but Truflation has approximately doubled in the last few weeks. The direction of travel for the real-time inflation metric is concerning. This battle between long-term deflationary trends and short-term inflationary trends is the most important thing to watch right now. If you had asked me three months ago about asset prices, I would have tempered your expectations because of the deflation risk. Assets have a hard time appreciating rapidly if liquidity is being drained from the system and consumer prices are stagnating or falling. But now the calculus is changing. The national debt has increased by almost $3 trillion since President Trump took office. The Fed has started expanding their balance sheet again. And oil is climbing higher every day. The rapid change in the economic environment means that various assets, especially bitcoin, have become significantly more interesting. Bitcoin is the most sensitive asset in the world to global liquidity, so we should expect the digital currency to do well if countries are printing insane amounts of money to fund an ongoing kinetic conflict. The question in that scenario becomes “how will bitcoin perform if the US is pushed into a recession?” As we saw during COVID, the Fed and other central banks around the world have perfected the QE playbook. I have said over and over again that recessions of 18 months or longer have been essentially banned by monetary policy tools. So if the US enters a recession, which I am still not convinced will happen, we should expect the Fed to print trillions of dollars and cut interest rates to 0% again. Bitcoin was built for that moment. There is a famous saying in the bitcoin world: “Bitcoin has no top, because the dollar has no bottom.” I believe that statement is the most important way to understand bitcoin as an asset. The US government is facing a potential crisis. If they can’t end the war with Iran, they will quickly have to turn to monetary policy tools address an economic crisis at home. Remember, this is all happening during a midterm election year too. You can’t go into an election with high inflation, degrading affordability, and a never-ending conflict on the other side of the world. Because of these facts, I am holding out hope that the administration will end the Iran war in the coming weeks. They will claim victory and then turn their attention to driving oil prices lower, including a focus on getting the BLS inflation as close to 2% as they can. There is no promise this vision of the future will happen though. Thankfully, the long-term deflationary trends are still very much alive. The adoption of artificial intelligence is only just beginning and companies continue to report record revenue with fewer employees. You can see the impact in earnings reports and the labor market. And now we have Jeff Bezos, Jensen Huang, Elon Musk, Travis Kalanick, and many others talking about AI applied to the physical world. Whether we are talking about robotics in manufacturing, industrial, or infrastructure industries, it is obvious that superhuman intelligence is coming to a location near you. If software is driving positive impacts in the economy, just imagine what happens when automation hits various industries that are notorious for their inefficiency. We are talking about trillions of dollars in enterprise value up for grabs. I don’t know who wins, but the world’s smartest and best capitalized entrepreneurs are going to compete for the prize. This brings me back to bitcoin. If we are entering a world of abundance, where the cost of productivity is rapidly dropping towards zero, scarce assets become significantly more valuable. So in a weird way, Bitcoin appears to be positioned to benefit from increasing inflation and liquidity, while being the natural resting place for capital in a post-abundance world. I was preparing for a big headwind in bitcoin to start the year. But I have changed my mind in the last few weeks. This setup is looking attractive unless the war in Iran is ended quickly. My current views don’t mean that bitcoin will never go below $65,000 again, but I am glad bitcoin is the core holding in my personal portfolio. It feels like I am prepared for a future world that is going to look different than the world we are used to. Hope you all have a great end to your week. I will talk to everyone on Monday. - Anthony J. Pompliano Founder & CEO, Professional Capital Management A Massive Bitcoin Bull Case Is Forming Bill Barhydt is the founder and CEO of Abra and a longtime leader in digital assets and crypto wealth management. In this conversation, we discuss bitcoin’s relationship to global liquidity, money printing, and geopolitical risk, as well as why retail investors still drive crypto price action. We also cover new crypto regulation and the Clarity Act, Abra’s plans to go public via SPAC, the rise of tokenized equities and real-world assets, and how AI is transforming financial services and business operations. Podcast Sponsors Figure – True DeFi Democratized Prime to earn ~9% APY! They also have the lowest industry interest rates at 8.91% with 12 month terms! Take out a Bitcoin Backed Loan today and buy more Bitcoin. Check out Figure ! Figure Lending LLC dba Figure. Equal Opportunity Lender. NMLS 1717824. Terms and conditions apply. 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Do your own research. 1 Staking rewards are not guaranteed. Estimated APYs are subject to change based on network conditions, fees, and compounding frequency, and eligible assets may vary at the custodian’s discretion. Staked assets are subject to the terms of BitcoinIRA, the custodian, and the applicable blockchain protocols. Staking carries risks, including market volatility and potential loss of principal, and may not be suitable for all investors. While staking can provide the opportunity to earn rewards on your crypto (similar to how a savings account earns interest), it operates very differently from a bank account and involves unique risks that should be fully understood before participating. Clients are strongly encouraged to consult a CPA, investment, or tax advisor to determine if staking aligns with their financial goals. BitcoinIRA a dba for Alternative IRA Services, LLC (“AIS”) is a platform that connects consumers to qualified custodians, digital wallets and cryptocurrency exchanges. The company is not a custodian, is not a digital wallet and is not an exchange. Self-directed purchases processed through