Fighting For Value

The Great Inflation years of 1970-1981 experienced out of control inflation ranging from 4.9% - 12.5%, economic recessions, severe energy shortages, and as Wharton professor Jeremy Siegel summed it up -- “the greatest failure of American macroeconomic policy...".

Decades later, we ask – Is history repeating?

Let's start with a quick recap of a few key points from Chair Powell...

From the standpoint of our Congressional mandate to promote maximum employment and price stability, the current picture is plain to see: The labor market is extremely tight, and inflation is much too high. Against this backdrop, today the FOMC raised its policy interest rate by 3/4 percentage point and anticipates that ongoing increases in the target range for the federal funds rate will be appropriate. - Chair Powell's Press Conference Opening Statement

As expected, a 75 basis point increase. Akin to throwing a monkey wrench inside a turbine jet engine to see what happens.

Growth in consumer spending has slowed significantly, in part reflecting lower real disposable income and tighter financial conditions. Activity in the housing sector has weakened, in part reflecting higher mortgage rates. And after a strong increase in the first quarter, business fixed investment also looks to have declined in the second quarter.

These indicators don't change overnight. With major tech companies leading the way with hiring freezes and lay-offs, the slow-down is likely to continue.

As mid-term elections approach, politicians can't risk losing their seat by having too many of their constituents crumbling under too much financial pressure. The world is on edge, with many angry people looking to take down someone – anyone.

At today’s meeting the Committee raised the target range for the federal funds rate by 3/4 percentage point, bringing the target range to 2-1/4 to 2-1/2 percent. And we are continuing the process of significantly reducing the size of our balance sheet...

Over coming months, we will be looking for compelling evidence that inflation is moving down, consistent with inflation returning to 2 percent. We anticipate that ongoing increases in the target range for the federal funds rate will be appropriate; the pace of those increases will continue to depend on the incoming data and the evolving outlook for the economy.

Looking for compelling evidence, eh?

In this week's post, we'll show our premium subscribers what's in the cards for the weeks ahead (assuming some major geopolitical event doesn't derail the world).

Let's start with a freebie...

In the hour leading up to yesterday's FOMC statement, Bitcoin jumped to just shy of $23K.

The alt coins did well, as many rose from their recent graves 7%-24% in a matter of hours.

Wait, didn't the Chair Powell statement indicate more pain?
Shouldn't crypto be panic selling?

On January 24th we shared the narrative we believed would unfold this year...

Contrary to Crypto Twitter sentiments that rising interest rates will "kill crypto", our research differs and uses onchain-intelligence and seasonality indicators to filter out short-sighted biases. - All Market Cryptopian

Here's how our research interprets the Fed Fund Rate -

Zero Rate Season = Cautious and steadily bullish, low volume, max fear.

Rising Rate Season = Semi-bullish, rising volume, choppy.

Plateaued Rate Season = Very bullish, heavy volume, take profits, max greed.

Dropping Rate Season = Game over! Return to max fear.

What transpired since then is Zero Rate season - cautious, steadily bullish (long-term trend), low volume, max fear.

Max fear was powered by the avalanche called Terra Luna and over-leverage crypto hedge funds, which evaporated or paused billions of dollars.

As the last few days of July wrap up, the signs hint that June printed the low for now. The Effective Federal Funds Rate is moving up and so is BTC – cautiously.

Choppiness is still expected between $18K - $24k. The next rate increase is another eight weeks away.

Given how sensitive crypto is to price movements, unfortunately another market ambush can literally come from anywhere - a project collapsing under sell pressure, a stablecoin debacle, a regulatory sledgehammer forged in Gensler's garage, WW3, a few whales partnering up against Michael Saylor – too many attack vectors to keep track of.

For our premium subscribers, let's uncover some fascinating trends unfolding...