Since 1967, there have been 689 CPI announcements, of which there were only 31 core CPI (ex-shelter) recordings that were negative compared to the previous month. Yesterday was one of those days…
Simply put, Shelter increased slightly MoM, but given the monthly volatility of the data and the fact that most items except Shelter have seen less inflationary pressures… Yesterday’s CPI data was clearly “very” optimistic.
The FOMC was more hawkish than dovish. The number of interest rate cuts this year has been adjusted from 3 to 1.
The only concern I had before the FOMC started was that the dot plot would only cut rates once instead of twice. With soft CPI, markets were pricing in a second rate cut this year. Fed members did not revise the dot plot after soft CPI data… The Fed remains firm. I expected a two-time cut, but I think I interpreted it too optimistically. (But this CPI was surprising enough)
Since BTC is 100% very closely tied to liquidity movements, it clearly reacted to the dotplot results that were outside market expectations and the hawkish stance of the Federal Reserve. (69.9k > 67k)
“So we’ll have to see where the data lights the way…today was certainly a better inflation report than almost anybody expected. And we’ll just have to see what the incoming data flow brings and how that affects the outlook and the balance of risks”
“So by so many measures, the labor market was kind of overheated two years ago, and we’ve seen it gradually move back into much better balance between supply and demand….We see gradual cooling, gradual moving toward better balance. We’re monitoring it carefully for signs of something more than that, but we really don’t see that”
“I just think people are coming to the view that rates aren’t going to — are less likely to go down to their Pre-Pandemic levels, which were very low by recent history measures. Now, we can’t really know that”
“I don’t have a precise date for you..we’ve made good progress [on inflation] & we’re in the phase now of just, you know, sticking with it until we get it done”
I don’t think Powell’s remarks were much different from the typical FOMC… He said he would still proceed with the fight against inflation and would wait for more data. Macro is divided into bearish/bullish depending on interpretation, but I don’t think there were many pigeons in the market’s expectations for this FOMC.
One thing that is optimistic is that the Federal Reserve is giving the impression that there will be a rate cut this year.
The “FOMC Play” I shared on Twitter yesterday was good in terms of CPI, but… There seems to be a mistake in the dot plot 🙁
The white line is an upward trend line that has been running since October 2023. I’m not a 100% believer in trend lines, but I feel like the crypto market is on the verge of entering a zone that could become more difficult for a while. A time when stable position management seems necessary. BTC is currently not reacting much to positive signals and is reacting strongly to negative signals… Clearly, this is not the kind of bullishness we would like to see right now.
Some current thoughts:
- BTC is still bullish above $65,000. (Same as the existing view)
- A downward move below $65,000 could test $61,000.
- Breaking out of the upward trend line that has been running since October 2023 is not objectively optimistic.
- The blue box is a level that can provide support in the event of further market decline.
- If BTC doesn’t recover 70k within a few days, I think it will take a little longer.
- I do not own a single altcoin, and in the current market conditions, altcoins may be very weak to BTC’s downward/sideways movement. (I mostly trade BTC and don’t like this risk)
The optimistic thing is that BTC currently appears to be undergoing a period correction rather than a price correction, cooling much of the overheated market. The drop to 40k being discussed in CT seems very unlikely unless there is a black swan event… It is impossible to predict the future 100%, but if there are further period adjustments, it is likely that it will be until Q3. Be patient.
I am holding BTC spot, buying on dips and not actively using leverage. I’m waiting for a good time to use leverage. Yes, I definitely remain optimistic.
The purple whale is continuously buying spots… What could be the reason? It appears to be the only thing that protects most of the current BTC decline.
There’s still not much to say about the options market. Very quiet. Accordingly, Vol maintains a downward trend. Yes, clearly the options market is thinking it will be a quiet summer. RV is at historically low levels and is currently rising, so VRP appears to be adjusting ideally. I think a good opportunity to buy options is coming, and it’s worth noting that an environment is being created where the movement could be bigger than before. (BTC sideways trend has been going on for 3 months and the boring movement will end at some point)
The stock continues its upward trend, reversing all the bearish news and downward moves. Frankly, given the current market conditions, it’s hard to imagine extreme bearishness for stocks without clearly followed by bad data… I expect the upward trend to continue!
If the stock enters a major decline/correction phase… I don’t think it’s good for the crypto market. (Crypto market is not keeping up with the rising stock movements)
Trump and Biden are increasingly embracing crypto…
Trump has met with executives from BTC mining companies and said he wants all remaining BTC to be mined in the U.S. Biden has said he is also considering receiving election-related donations in crypto. I don’t think the acceptance of crypto by politicians is currently reflected in the price at all… Expect more upward movement as we head into Q4.
There is another macro event today. Simply put, news that the job market is easing will be positive for the market and PPI does not look likely to significantly extend market movements.
Good luck!
NFA DYOR
<Source : TradingView, Material indicators, Amberdata, Matt Cerminaro, Longview Economics, The Transcript, Coindesk, TheBlock>
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