FOMC, CPI, and Bitcoin

Hey everyone and thanks for jumping back Into the macroverse today we're going to Talk about the most recent fomc meeting We're going to also discuss CPI we got That data yesterday and we're also going To discuss Bitcoin within the context of The FED funds rate and pivots and Whatnot in in the FED funds rate over Over a prior cycle so if you guys like The content make sure you subscribe to The channel give the video a thumbs up And again check out the sale on into the Cryptivaris premium add into the Cryptiverse.com let's go ahead and jump In so I'm not going to try to spend too Much time on each individual thing Because there's a lot to talk about the First thing I want to say is that the FED has at least paused temporarily now There is a chance that they could raise More as the year goes on in fact if you Look at CME Futures the market is Currently suggesting that there's about A 64.5 chance of another 25 basis rate 20 basis point rate hike in July okay so We need to understand that just because They've paused out this meeting does not Mean that it is going to sustain however I would argue that there is a reasonable Chance that they won't hike in July Right I mean even the market says I mean 35 and a half percent chance they will Not hike in July And so that means there is a chance that

This is the terminal rate one of the Things I've said before you know back When this whole thing got started was we We talked about the idea of the terminal Rate being somewhere between five and Five and a half percent what's Interesting is while a lot of people Thought we would not get anywhere close To that level the reality is there's a There's a risk of going above that level Okay so the risk on it is more to the Upside for the FED funds rate than it is To the downside I mean we're well within The range that we suggested five to five And a half percent we're still at five And a quarter but again the the risk Remains to the upside okay so if we do Get one more 25 basis point rate hike in July which is basically as far as the Market thinks we're going to go then That would get us to the upper part of The range that we laid out what's Interesting though is that the market is Now not expecting rate Cuts until 2024. One of the things that Powell said today Which I I thought was interesting is he Said and it shouldn't really come at a Surprise right he said not a single Person on the committee wrote down a Rate cut this year nor do I think it is At all likely to be appropriate so the Only way the FED Cuts this year if Something absolutely catastrophic Happens okay so it's not that it can't

Happen it's just that it's a very Unlikely outcome okay if something Catastrophic were to happen then yes you Could see a cut this year but I do not Think it should be the you know the your Your base outcome right like it Shouldn't be your base case Um at this point it doesn't mean that There shouldn't be some hedging going on Related to that idea but I think the Base case should be that the FED will Stay higher for longer whether that Means another 25 basis point rate hike Or not Um I know some some committee members Are calling for two more raid hikes that Remains to be seen but at this point We're still looking at 5.5 for the Federal funds rate as you can see if you Read it over here Says in support of these goals the Community decided to maintain the target Range for the FED funds rate at five to Five and a quarter percent this allows The committee to assess additional Information and its implications for Monetary policy I mean what this means Is basically there's long and variable Lags in in how monetary policy Propagates through to the economy and They are starting to see some potential Softening Um in certain areas and I I think they Just want to wait and see okay there's

Also the stuff with the with the TGA That needs to get refilled and so by by Pausing for at least a month it allows It allows some flexibility in other Areas now that's not to say that it is The terminal rate because we could go Higher but it is it is at least a Consideration at this point because we Now we now have paused and the way in Which it could become the terminal rate Is if we see significant deterioration In financial markets sometime between Now and July all right If inflation holds you know holds high At high levels then yes you could see Another another a hike speaking of Inflation let's go through it headline Inflation fell to about four percent Year over year pretty substantial Decline and you can see that it's been Moving down uh in a in a very at a very Steady Pace if you look at the monthly Change of this you can see it's been Continuing to move down at again a Fairly similar Pace as it has been since July of 2022 and so this is good news Okay ideally you know look we talk about The risks all the time okay but in order To get to a sustained period of economic Expansion where you know we don't have To live in this environment of just Constantly High inflation and and Worrying about what the fed's going to Do to combat that inflation we need to

See inflation get down get back down to The two percent Target until that Happens right we still do of course run The risk of the FED raising And and potentially pushing us Um pushing the economy over the edge so Headline inflation is looking like it's On the right path I mean in fact at this Rate it wouldn't take that much longer To get down to two percent Right I mean we were at six percent in February now we're at four percent in May now arguably it could take longer Um to go from you know four to two than It did from six to four but we've also Mentioned many times that during the Second half of this year it's more Likely that we see rapid disinflation Than hyperinflation remember the first Larger rate hikes did not occur until Like last summer so it's not even we're Only just now getting to the phase where We are where we could even say the Economy is really starting to feel the Effects fully of these rate hikes that Have started to occur about a year ago So we still need to see exactly the Damage that the FED has done to the to The economy and I think by you know just Waiting until next month to figure out If they're going to go higher probably Does make the most amount of sense right I mean I do think that actually makes

The most amount of sense Um And and it actually could be you know I Mean it could be a sign as well that There are I mean if the FED were very Very concerned if they were overly Concerned about inflation and they Thought there was no issues at all in The labor market they probably would Have just hiked again but Watch what the FED does not what not What the FED says okay so headline at 4.1 if you break it down into its Constituents Um you can see that a lot of the a lot Of the different categories are in fact Coming down so food and beverages coming Down Um this is what it looks like on a Longer time period right so you can see That it's last month that was at 7.46 Now it's a 6.58 I think it's likely just Going to keep trending in the in the Right direction okay so that one's Coming down housing coming down this One's lagging a lot but I I think that You are going to start to see this Really really continue to move down now Housing prices have started to go back Up a little bit but I don't think it's Going to to cause a major headwind to This inflation year of e or going too Much higher from where it currently is Apparel

Um uh moved down briefly it moved down Slightly which is a welcome change from Last month where it went back up so we'd Like to see that continue to go down if You look at Transportation it's actually Deflationary note I said deflationary Not disinflationary deflationary means Prices are actually going down you can See that it's a negative 1.68 it was Also negative a couple months ago as Well Um but again that is one that actually Historically is more likely to go Deflationary while other categories are Less likely to do so Medical Care Inflation continues to go down from 1.05 Percent now to 0.724 so that's welcome News Recreation inflation has dropped From 5.01 to 4.56 education and Communication has gone down other goods And services actually went slightly up And that's it right I mean those are Those are the categories so all in all While there was one category that went Up everything else went down And this is of course ideally what we Want to see right we want to see this Stuff continue to drop because we want To get to a period of more sustained Economic growth uh rather than you know The FED raising rates Um and and markets constantly having to React and and figure out okay well which Companies are zombie companies and which

Ones are going to die out a lot of them Have died out they're not black swans Just an artifact of tighter monetary Policy if you go look at core inflation That is is one that has been stickier Because as you will see really ever Since the year began core inflation has Been above five percent right January 5.55 then February 5.53 then 5.6 and 5.54 now it's at 5.33 so it is a it is a Welcome move that it's if you look at a Monthly change right it is coming down But it's still above five percent I mean It still is above five percent so in Order to have any chance I think of the FED just pausing completely we really Need to see core inflation uh continue To drop next month okay so if we can see It drop well it would be for this month Right but if next month we get the data For core inflation and it's still Dropping that would be a very positive Sign I think Now the FED has been pretty clear that They they like to follow core pce and That one has not been as Um as it hasn't behaved as much as we Would like as you can see the most Recent Um data point that we have which I mean Again this this was updated on on May 26th so we should get more data on this In what like a week or two the most Recent data point you can see that

Actually went up so ideally we would Like to see this drop considerably on The next reading because this is one That has remained relatively sticky we Have not yet received the new data point Again the last update was on May 26th Not yesterday so this is one that the FED does follow a lot closer and Something that we we need to take into Consideration just as reminder the FED Uh sorry CME uh see me watch the watch Tool over here the CME Group is still Suggesting we get one more 25 basis Point rate hike to get us to five and a Half percent followed by a calls and Then Cuts starting in 2024. all right so That's where we are with that Now if we go look at Bitcoin one of the Things that I I want to discuss and We've talked about this a lot but I I Want to go through it again it is Dubious at best all right so We need to accept that all right I'm not I'm not here to tell you what has to Happen or anything like that but we've Talked about this idea before and I I Think given the the Um recent events it deserves our Attention because if you're still here At this point in the cycle you'll pat Yourself on the back it's hard to stay This long but if you've stayed this far And you don't make it through you only Have yourself to blame all right because

If you're if you're here now I don't Really think you're a tourist but there Are still a lot of people that will fall Off okay because they didn't think they Were a tourist but in reality that's What they were so I do hope you can Stick around if you've made it this far Into the cycle time-based capitulation Is brutal absolutely brutal you know We've talked a lot about bearish Outcomes Um and and I still do remain uh very Skeptical of the altcoin market and will Remain skeptical until the dominance of Bitcoin is is much closer to 60 percent But we need you know you really need to Start thinking about some of these Things and how they could play out Because once once the business cycle Once the tail end of it gets here where The unemployment rate starts to move Higher things can move quickly okay so Make sure you have a plan One thing I want to talk about Is how delayed the reaction function of The FED has been this cycle okay Normally when the FED is Raising they're Raising into markets that are rising Right they're raising into a strong Economy and I mean normally you would Look at this in the context of the s p But because most of you care about Bitcoin that's what we're going to focus On in this video

The last business cycle right you can See the Fed was Raising into a strong Economy they continued raising as as you Know as the markets came came back down But at the end of the day right at the End of the day what happened Bitcoin Found its bottom When the FED hit the terminal rate That's when it found its bottom okay So there's going to be two ways to Interpret this and I don't really know Which is the right way okay it could be A combination of both but I'll tell you The one that we've talked about before And then we'll talk about the secondary Outcome but I've said this before There's this there's this reality that The FED is so far behind the curve Because normally they raise rates into a Strong economy this time they didn't Start raising until you know markets in General were already heading down now Bitcoin does not represent the entire Market I mean you know the s p has been Going up recently while cryptocurrencies Go down but the s p was also going down During 2022 and that's basically when The feds started raising rates they Should have started raising rates in 2021. You know this probably when they should Have started so here's the thing though In 2018

Bitcoin found its bottom It's low once the terminal rate was hit It then found its pre having year high Once rate Cuts began It then found its secondary bottom the Secondary scare that we've talked about On the last rate cut Okay so Three clear changes to Bitcoins price Trajectory based on what the Fed was Doing Pretty clear right I mean it's pretty Clear you have a low A high and a low and every single one of Those corresponded to a change in Monetary policy every single one Now what's going on this time now the First reaction might be to say that well What what if what does this mean does That mean that Bitcoin hasn't found its Low because the FED hasn't maybe reached Their terminal rate there's a chance the FED goes higher to five and a half Percent I don't actually know if that's The correct way to interpret it the Correct way could be to say but it is Something that we need to consider the Correct way could be to say that the Market interpreted the shift from 75 Basis point rate hikes to 50 that could More so Mark what the pivot right the More so Mark the actual pivot as markets Have interpreted it okay So instead of the terminal rate marking The low for Bitcoin it was more so the

Pivot from 75 to 50 right Therefore Instead of rate Cuts corresponding to The prehabbing year high perhaps it was The terminal rate right again we don't Know if it's the terminal rate or not Right it might not be but there is a Chance that this is the terminal rate And if it is then it actually marks the High pretty well right so you could Argue one could argue that we're just Following it one step behind from the Last cycle right so this low Marks what last cycle was the pause And then this high was corresponding Last cycle to a cut now it potentially Just corresponds to a pause Okay because I know they didn't pause Until this meeting but if you just look At it right it was it was more so when The terminal rate was potentially Reached there's no guarantee this is the Terminal right and I've said before they Could go to five and a half percent Right they could Um I don't honestly I don't really think They need to Um my my guess is that inflation is Going to continue coming down regardless Of whether they go another 25 basis Points or not but there's this idea then That The cut right the First Rate cut could Mark the secondary scare bottom

Right So whenever they cut rates that could Mark a potential low for Bitcoin USD it Could be a lower low compared to 20 Um to 2022 it could be remember this low Over here was potentially a higher low Because the FED came out and printed six Trillion dollars probably had some Effect right with high inflation they Might be more hesitant to do that okay So there is a risk of that happening Remember in the 2015 cycle we actually Put in a double bottom the secondary low Came in August after the first one which Came in Um January so it was January to August And so we need to be aware that Something like that could happen okay So perhaps A future rate cut And maybe maybe a future rate cut is the Only cut maybe it corresponds to the First and last cut and therefore all This gets grouped into one thing like if They just cut a significant amount in One go like that's a possibility right If they just go 100 basis points in one Go then maybe the first and the last Cutter are in fact the same but we Should at least consider this this Potential outcome where the First Rate Cut could Mark the low okay so again Last cycle it was Terminal rate reached Bitcoin bottomed

Rate Cuts began Bitcoin tops rate cut Ended Bitcoin bombed this time shift From 75 to 50 Bitcoin found this low Potential terminal rate Bitcoin topped Potential future cut Maybe Bitcoin bottom Right The alternative way to look at it is Probably a more depressing way to look At it right and and that would be that If um if Bitcoin follows what it did Last cycle So during this rate hiking cycle Then that means that there's a chance That the terminal rate hasn't been Reached and perhaps Bitcoin Finds Its First low here once the terminal rate is Reached that's probably a more Depressing way to look at it right it is Something that we should consider I mean We should consider both outcomes but we Have talked about this for a while the Idea and the reason we say the reason we Say this is because the FED is so far Behind the curb I mean normally they're Raising when the markets are doing well This time they didn't start until so Much later and so that is something that We that we have to Um consider you know we put out Videos a couple months ago Calling for a potential summer lull I know that those views were not always Met with the most um thrilling response

But so far it seems to be playing out I Mean Bitcoin has just kind of slowly Gone down right I mean you know I mean I I on any given day we all get you know We we might question that thesis right On any given day but when you sort of Just zoom out a couple months later Has this not just been a slow bleed Right A summer lull if you will if you will so I I think that there's a lot that we can Learn from how monetary policy can Affect risk assets like Bitcoin a lot of People might assume that crypto is is is Not going to they might they might make The unfortunate conclusion that that Crypto won't survive because Um You know just because of all the uh Regulation and stuff but guys that's Just I mean that stuff's all noise I Mean like it's not I mean not completely Right there is the idiosyncratic risk of Regulation that we have to consider but At the end of the day the thing that Matters the most for Bitcoin anyways There's the altcoin market there's Bitcoin right the thing that matters the Most for Bitcoin it's just monetary Policy you know is is depressing as it Is and if you don't believe me take a Look at this Take a look at Bitcoin Divided by the money supply okay and

Would you care to see where we have a Rejection on here You know the same level we got in 2017. Same exact level where did we find this Low in 2021 the same level so What you're seeing here is This Resistance level has now played Resistance again and Once Upon a Time it Played as support So this is something That we have to consider right This is something that we we must Consider as as we continue to navigate Financial markets How does the money supply affect these Assets you can see that Bitcoin was Rejected the same place that was Rejected in 2017 when you account for The money supply it was also rejected From the same place that it found as Support in 2021 when you account for the Money supply okay so that's where we are Right now we the business cycle is a Long and grueling process right we're Not trying to to claim that it's easy And it's short it's not it's a long and Grueling process and Um And I I hope that you know I hope these Videos have been helpful to to people as We've navigated the cryptoverse I know They're not always the most popular Views but my goal

Um with all this is to not tell you what I think you want to hear but it's to Tell you what I actually think is going To happen it's a hard it's a hard thing Because Um sometimes what I think is going to Happen doesn't play out and in that in That case like people you know people Might get upset if it if it doesn't play Out and you know they they would have Preferred to have been let's say more Bullish but at the end of the day I just Want people to know that these views That I put out are are so that people Can manage their risk I'm not trying to Tell you what to do or anything like That right I just want you to manage Your risk because I've been wrecked in Crypto so many times and if I can save One person from going through some of The pain that I've gone through Especially with the all coin Market in Bear Market years in the prehabbing year And even the early stages of the having Year then I I like to do that right I Like to provide a perspective that might Make that might make people think twice Before they go bet the family farm on on Some altcoin so please remember that That is my goal is to just try to help Provide this perspective so that people Can can navigate markets from a data Centric perspective rather than You know following what some you know

Person is Shilling the most uh the most Recent week the thing with the the Problem with the altcoin market is that You know a lot of the people that Promote these things Um for the last 18 months you know Despite the fact that they are just Completely fighting the FED on on high Risk assets I mean the feds look the s p Can climb the wall of war no problem They climbed the wall of worry in 2019 Too right crypto did not right crypto Did not so please understand that The altcoin market the people that will Show these things to you time and time Again all they're ever going to do is Just say the same thing until they're Right or they'll just stop talking about It please understand that my goal is to Show you that look a lot of these Altcoins will simply just go to zero and You might argue that total three could Eventually find new highs one day and I Would say that there's a good chance That happens but that doesn't mean that The altcoin that you hold has to see That high okay doesn't mean that it Won't but history shows that most of Them just go to zero so please be Understanding of that reality that many Altcoins uh will just sort of Fade Into Oblivion and that next cycle there will Be a new class of cryptocurrencies that That catch the eye of new investors and

Some of the prior altcoins will like you Know could make new all-time highs I Think there probably will be a few that Do and I always put that in because that Way everyone can think you know can be Comforted by the fact that hey maybe Theirs puts in a new all-time high Because there's a chance that it does That I don't want you to think that I Can it's just that You need to be aware that if you're Holding a basket of a hundred different Altcoins there's a good chance that like 98 98 of them will not hit a new high so Just please be understanding of that Um Monetary is tighter monetary policy is Is going to be difficult uh for Cryptocurrencies to find a sustained bid But it doesn't mean that they won't Eventually recover once we get back to Looser monetary policy okay we'll wrap It up there thank you guys for tuning in Make sure you subscribe give the video a Thumbs up uh please do give the video a Like I I know I don't I probably don't Say it enough but it does it does help Uh the algorithm and again we do have a Sale on into the crypto versus premium At into the cryptiverse.com I'll see you Guys next time bye