Here's what the Fed literally said:
- Fed is committed to fighting inflation
- Looking for "compelling evidence" that inflation heading back towards 2%
- "increases will continue to depend on the incoming data and the evolving outlook for the economy"
Here is what the Fed actually said and meant to say:
- as long as the pesky CPI does not print above 8%ish (more than once) then the next meeting is the last hike
- since we are clearly in a recession (but not allowed to acknowledge it or label it) we better cool off before really causing more serious damage
- hey look at the ten year, the shitty economy is doing our job for us!!!!
- hey look at EUR and JPY and the Eurozone economy, our debt we will end up buying is getting a nice bid here with Japan and the Eurozone in the toilet
- folks, we tried, but oil prices are not our fault and if we raise the Fed Funds above the CPI at 8ish (the "textbook" or "correct way" those 300K MBAs on TV keep telling you is the way to fight inflation) then you will see an absolute debacle for risk assets and the economy
- wink, wink America, if we keep crushing risk assets, cap gains tax receipts keep declining further, and then the corrupt politicians will end up demanding we print even MORE money to prop up their scams
So where does that leave us? We can't or won't predict exact timing, but we stated earlier in the year that the FA setup for Bitcoin was perhaps the best we had seen ever (going back to 2013).
Bitcoin Is The Fed's New Bestie
When Will Bitcoin Form A Bottom?
And now it appears we are closer to the Fed cutting rates than we are to the Fed getting more hawkish. Make that of what you will. There are a lot of other things to consider as well now.
Banks and Institutional Access
The Bank for International Settlements, somewhat of a god like institution perched high above us mere mortals, has proposed a plan and policy kit allowing banks to store up to 1% of core capital in Bitcoin. CBDCs are gaining momentum. It's quite clear rather than marching on in the war against Bitcoin, the status quo parasites have opted to try and co-opt crypto. Bullish for Bitcoin.
Fed's Updated Mandate
The Fed is now responsible not just for full employment and price stability (in terms of its official "mandate" purportedly supervised by Congress). The Fed is now responsible for equitable employment. What does this even mean? We won't debate the true intent or politics. We will say that this looks and sounds like an easy way for the Fed to keep expanding its balance sheet and implementing YCC all the while pointing towards how some marginalized or oppressed group or segment of the economy "is still not at full employment". One could see how the Fed and Congress could use this updated mandate to justify all kinds of "economic stimulus". Extremely bullish for Bitcoin.
Soft Default - The Fed WILL Print More Money
Hard Default = Implosion. Soft Default = everyone gets paid back but the currency becomes more and more worthless along the way and those that do not own assets suffer the most. It's quite clear Russia and China are not looking to purchase more UST but rather unwind out of it in a more definitive manner. Japan has its hands full with YCC to say the least. Those are the three largest buyers historically of UST. At this precise moment, the Fed is benefiting from a bid under U.S. Treasuries because of a "flight to quality" (it's all relative folks), but over time the math surrounding $4T annual deficits and more than $250T in unfunded liabilities will force the Fed to crank up the money printer, expand the balance sheet, and buy more of the debt created by the Treasury.
Bitcoin Ecosystem Maturity and Stress Testing
Luna crash. Tesla dumps more Bitcoin. Bitcoin related gambling shops and hedge funds get crushed. Bitcoin Lightning Network keeps growing steadily. More energy companies use Bitcoin to monetize environmental waste and protect rather than hurt the environment. Bitcoin has been, and continues to fight through every obstacle put in front of it and it keeps on ticking and producing block after block. Bitcoin is ready to take on a much larger role in the global financial system.
What Next?
There are tons of risk factors still as we all know. Taiwan invasion. Food shortages. New doom and gloom fear tactics shoved down our throats by the establishment. Plenty can go wrong. The worse the economic data gets, the more the market will expect and demand the Fed to expand the balance sheet. The Fed has a gap NOW to exploit the "least ugly duckling" scenario and pivot to extreme dovishness (without saying so) as other regions implode putting a bid under U.S. debt and USD.
Watch equities. Look for a strong and legitimate follow through day and confirmed rally as defined by IBD (Investor's Business Daily). We may not agree with the correlation, but Bitcoin is still clearly linked to risk on versus risk off decision making. If "risk on" remains a hated rally that persists, then it might be time to enter a new uber bullish phase for Bitcoin.
We still await a monumental turning point, or bigger pivot, if you will. If/when the market succinctly and stubbornly discounts and projects that the Fed MUST expand its balance sheet into perpetuity, then that is when the sky truly is the limit for Bitcoin. The Fed will be able to sunset the debt based fiat system while guiding the financial system towards the new source of pristine collateral - Bitcoin.
