Bitcoin, lately, is resting and the good thing is it’s not too choppy.
It hit around $69,000 before retracing back to the mid-$60,000 levels and it’s just the sign of things to come.
We are at the tail end of the asset purchase program and many outsiders believe there will be an awkward transition.
That’s probably not the case.
We want it orderly which helps an inherently volatile asset like Bitcoin, and I believe that is what we will get.
The 6.2% CPI number sets the upper limit precedent and if later numbers come in at 4% or 5%, Bitcoin prices will react positively.
As the price of Bitcoin has persistently maintained its north of $60,000 status, the talking heads and diva hedge fund managers have stopped criticizing its existence.
It’s about time.
That is a massive victory and stamp of validation for the fledgling asset.
At a broader level, I believe the Fed is stuck between a rock and a hard place.
Each fork in the road gives Bitcoin a higher price and they know it and the only deal breaker is uncontrollable inflation that will trigger a run on the US dollar.
Conversely, if the Fed prints more money, that’s an unambiguous green light for higher bitcoin prices cut and dry.
The second choice assumes what the Fed has somewhat admitted, inflation is permanently transitory leading to even higher levels of inflation which erodes the faith in the abilities of the Central Bank which will send Bitcoin prices higher as well.
This “liquidity event” has become a buy the rumor and sell the news follow through with Bitcoin prices trailing off.
Many were caught off guard by the strength of the CPI number and even if Bitcoin is lower today, this high inflation data strengthens the case for Bitcoin as a perceived store-of-value asset in the long term.
Sometimes we need to move 1-step backward to go 2-steps forward.
Triggered risk aversion which was accompanied by a strong dollar and weakness across the top cryptos would not have happened with a more moderate inflation number.
The little threads of doubt that inflation would be temporary have been shredded and the market has fully absorbed that a profound paradigm shift in the global economy is underway.
Another knock-on effect is near-term economic growth forecasts are trending towards that of “stagflation” — a period of stagnant demand and high inflation.
There are a lot of moving parts here, and this does move up a wall of worry for investors and retail customers.
It becomes psychologically harder to deploy large sums of capital into an alternative investment, real estate, and other large investments in this precarious environment.
That is why we are still in the $60,000 range and haven’t broken either side of $70,000 or $50,000.
On another positive note, the supply of bitcoin on exchanges continues to dwindle, which could indicate a preference among investors to hold Bitcoin in wallets instead of making their coins available to trade on exchanges.
This dovetails quite accurately with my prognosis that the crypto market is currently in a sit-and-wait mode observing to see how things shake out.
Basically, the crypto hoarders, who own 63% of the total Bitcoin supply, aren’t selling.
This short-term consolidation in the mid-$60,000 could be short-lived as I believe once the market stomachs higher inflationary numbers and strong dollar behavior, we will be barreling right into debt ceiling talks in December triggering another leg up to the Bitcoin story.
At the main street level, retail traders representing the middle class and their case to hold Bitcoin strengthens.
Living costs are up crazy and it's broad-based.
Increases in the indexes for energy, shelter, food, used cars and trucks, and new vehicles are among the larger contributors.
The case has never been stronger for the average Joe to protect themselves by investing in crypto as a bulwark against central bank money printing.
Traders in the market for futures contracts on the Federal Reserve’s key interest rate now see a 38% chance of a rate hike in June 2022, up from 28% prior to the CPI report.
My bet is that an orderly march up in rates will decrease the rate of change in higher rates giving a pathway to higher Bitcoin prices.
Ultimately, this type of news would have meant a 20% selloff if it happened a year ago, the asset has matured so much that it’s taking the stronger dollar reaction in stride.
This is highly bullish for the price of Bitcoin signaling that it’s here to stay.
