CPI was 8.3% today, while the forecast was supposed to be 8.1%. Pundits were expecting a stock market rally after the CPI reduction, and they got the opposite. Long term, this is the narrative Bitcoin protects against. However, for the rest of 2022. Bitcoin will likely struggle to get much traction as the DXY and VIX take off! Here was the DXY right after the CPI print today:
The VIX (volatility index) appears poised to do the same as the DXY (US dollar index), go parabolic. We already know, and have explained, why Fed rate hikes cannot keep up with inflation. Government spending has been too out of control, for too long. US national debt is now over $31 Trillion! Therefore, rate hikes only increase the debt service expense, and the Federal budget simply does not have room to raise debt service expense up to GDP levels, in order to control inflation. 30% FFA (Fed Funds Rate) is the level at which we believe, inflation can be controlled. Until the FFA gets there, rate hikes will be defenseless against inflation. This is why the VIX goes up when a CPI print is higher than forecasted:
Volatility has to increase when inflation cannot be controlled. Over the long term, this works in favor of ALL inflation hedges. Bitcoin is proven to be the greatest of those inflation hedges (Bitcoin, Gold, Silver, Land, Art, Classic Cars). Therefore, we lean on Bitcoin mainly because of the other inflation hedges, only Bitcoin is 100% decentralized from central banks. Art, Land, and Classic Cars are not far behind since they are hard assets, as is Gold and Silver. Yet, Gold and Silver can be manipulated very badly. Bitcoin still has free market aspects to it. It is not controlled. This is why Bitcoin rises above the other hedges as the best asset to own during times like this! We view land as a second best since it can be used to produce food. It is likely that stagflation and inflation will be with us in the US for a long time. Perhaps more than a decade. We will need these hedges against inflation, and the sooner we learn that the better. Below Charlie Bilello sees the FFA getting just over 4% at the end of the year. Perhaps, based on this latest CPI print, the Fed will keep pushing rates up into 2023, before they stop. Stop they will, view on twitter.
It will get too expensive to keep pushing rates higher as we get deeper into 2023. When this pivot does happen, whenever that is. Bitcoin will have it’s pump then. Bitcoin cannot pump with a rising DXY index! This is not financial advise, and we are not financial advisors. Hedging inflation correctly is a must, and it takes patience and some intestinal fortitude! Be patient, and hang with this until the direction of Fed monetery policy relents. It will eventually. Patience!
Neutral ATM is here to get everyone off of zero Bitcoin.