Oil Inflation and Tech Deflation: How Bitcoin Performs in This Game

Author: Anthony J. Pompliano, Founder and CEO of Professional Capital Management; Translated by: Shaw Jinse Finance

I once firmly believed that the biggest risk facing the US economy in early 2026 was deflation. Tariff policies, the deportation of illegal immigrants, artificial intelligence, and robotics were exerting deflationary pressures that kept inflation low, while economic productivity was rising sharply. This low-inflation, high-growth scenario was exactly what central bank governors around the world dreamed of.

But the war triggered by the situation in Iran has changed this landscape.

The impact of the short-term surge in oil prices has been widely confirmed, and there seems to be no sign of this trend abating. The real-time alternative inflation indicator, Truflation, recently reported a reading of 1.65%. This figure remains below the Federal Reserve's 2% target, but the real inflation rate has nearly doubled in recent weeks. The trend of this real-time inflation indicator is worrying. The most important thing to watch right now is the interplay between long-term deflationary trends and short-term inflationary trends. If you had asked me about asset price trends three months ago, I would have advised you to lower your expectations due to the risk of deflation. When liquidity is withdrawn from the market system and consumer prices stagnate or fall, assets struggle to appreciate rapidly. But this is changing. Since President Trump took office, the US national debt has increased by nearly three trillion dollars. The Federal Reserve has begun expanding its balance sheet again. And oil prices are rising daily. This dramatic change in the economic environment means that various assets, especially Bitcoin, are becoming increasingly attractive. Bitcoin is the most liquidity-sensitive asset globally, so if countries frantically print money to support ongoing military conflicts, we should be optimistic about its performance. In this scenario, the question becomes: How will Bitcoin perform if the US enters a recession? As we've seen during the COVID-19 pandemic, the Federal Reserve and central banks around the world have mastered quantitative easing (QE). I've repeatedly emphasized that deep recessions lasting 18 months or more have been largely eliminated with monetary policy intervention. Therefore, even if the US enters a recession (which I remain skeptical about), the Federal Reserve is expected to resume its multi-trillion-dollar money printing program and lower interest rates to zero. Bitcoin is born for such moments. There's a famous saying in the Bitcoin community: "Bitcoin has no ceiling because the dollar has no floor." I believe this statement encapsulates the core logic for understanding Bitcoin as an asset. The US government is facing a potential crisis. If it cannot end the conflict with Iran, it must quickly utilize monetary policy tools to address the domestic economic crisis. Don't forget, this all coincides with a midterm election year. No administration can face an election amidst high inflation, shrinking purchasing power, and endless overseas conflicts. Given these realities, I still hold onto the hope that the government will end the conflict with Iran in the coming weeks, declare victory, and then focus on lowering oil prices, including making every effort to ensure that the inflation data released by the Bureau of Labor Statistics (BLS) is as close as possible to the 2% target. However, this prospect is not a certainty. Fortunately, the long-term deflationary trend remains strong. The widespread adoption of artificial intelligence is still in its early stages, yet companies are consistently setting revenue records with fewer employees. This is already clearly evident in corporate financial reports and the labor market. Today, industry leaders like Jeff Bezos, Jensen Huang, Elon Musk, and Travis Kalanick are discussing the real-world applications of AI. Whether it's robotics in manufacturing, industry, or infrastructure, it's clear that intelligence surpassing human capabilities is about to permeate every aspect of our lives. If software has already had a positive impact on the economy, imagine what will happen when automation sweeps through long-term inefficient industries. This represents trillions of dollars in corporate value waiting to be unlocked. I don't know who will ultimately win, but the world's top and most well-capitalized entrepreneurs will undoubtedly compete in this arena. Returning to Bitcoin, if we are entering an era of material abundance where productivity costs are rapidly approaching zero, then the value of scarce assets will become significantly more apparent. Therefore, seemingly paradoxically, Bitcoin can both benefit from rising inflation and loose liquidity, and become a natural destination for capital in the post-abundance era. At the beginning of this year, I was preparing for potentially significant downward pressure on Bitcoin. But in the past few weeks, my view has changed. Unless the conflict in Iran subsides quickly, the current situation is very favorable for Bitcoin. My current assessment does not mean that Bitcoin will never fall below $65,000 again, but I am fortunate that Bitcoin is a core holding in my personal portfolio. I seem to be prepared for a future that is very different from what we are familiar with.