Stocks are going up hard. Bitcoin would be at $25K if it wasn’t for the bloody stupid FTX thing.
Here is what’s happening.
Yesterday, the US Bureau of Labor Statistics (BLS) published the CPI figures for October. 12-month inflation decreased from 8.2% in September to 7.7% in October. This signals that the Fed will lower the interest rate hike in their December FOMC meeting.
As a result, the stock markets saw a nice bounce. Bitcoin price has also recovered but while stocks continue to pump hard, BTC couldn’t keep it up. There’s simply too much uncertainty at this point.
There are signs that this bounce might be sustainable. That’s because signs are increasing that the Fed will — to a certain extent — move away from its hawkish stance when it comes to fighting inflation. And as we know from the past months, what is good for stock performance is also true for crypto markets.
The next FOMC meeting is scheduled for the 13–14th of December. The November CPI and unemployment figures will be out before that date. My guess is that the November CPI will continue to decrease.
At the same time, the US unemployment rate will increase. As we can see from the latest unemployment figures published by the BLS, there was an increase to 3.7% in October. In addition, earnings are decreasing, which implies that pay raises will not contribute to the increase in inflation.
As more and more US companies announce layoffs, unemployed people will very likely increase.
The inflation nowcasting number by the Cleveland Fed and the CME Fed Watch Tool also indicate a lower rate hike in December:
Alright, things are looking quite good.
However, does this means Crypto has bottomed and we will slowly go into an uptrend again?
My personal judgment is that without the improved inflation figures, we would probably see a lasting downtrend for crypto due to the contagion caused by the FTX crash. Just a few days ago, I wrote an article that BTC going to $10K was in the books.
This worst-case scenario is still possible.
But as mentioned in the previous article, the FTX disaster does not change the fundamentals of Bitcoin and decentralized technology. At least for now the strong correlation between the stock market and crypto is still intact. This means that we can expect crypto prices to go up for the next 2–3 months.
Another good sign is that the DXY (an index measuring the strength of the US Dollar versus other currencies) broke out of a multi-month channel. In the past, Bitcoin has benefited from a lower DXY.
So why am I only seeing a short relief of a few months for crypto?
Simply because the long-term macro picture is still very bad. We won’t see a quick economic recovery because the global economic crisis has just started. As a matter of fact, I think 2023 will be even worse than 2022.
I will publish an article in the coming days to explain what we can expect from the coming year.
Disclaimer: This article only represents the author’s personal opinion. Nothing in this article should be used as financial and investment advice.