The not-so-final post
4 min read

The not-so-final post

First some housekeeping. This week, I'll be transitioning this newsletter from Ghost to my new Twitter's Revue account. The new emails will also be delivered under a new banner: The Crypto Musings. Make sure you don't miss the change!

Cryptic ball: the vicious cycle.

Anxious traders didn't react very well over the weekend, as bitcoin nearly set a new yearly low in the first hours of the week, trading close to $18k. Fortunately, this Monday we saw some interesting, market-wide recovery. But is the panic over?

  • After crashing 10% since Friday and more than 20% since last week, the original cryptoasset quickly bounced some 9% today, following similar - even if less extreme - behaviour in the stock market as the Fed's FOMC looms.
  • As it's typical, ether's downfall amounted to a 26% weekly loss, but given the challenger cryptoasset had been on a run before, it is still further away from the yearly lows achieved last June in the aftermath of Terra's chaotic unwinding.
  • So, what is this volatility all about? As explained Friday, this is not about the Merge. It's "just" a reaction to the Fed's inflation fight and how it may keep hurting asset prices around the world in case recession fears come true.
  • You see, as inflation expectations become entrenched, people are more likely to spend more in the present as they anticipate prices to be higher in the future. This vicious cycle further compounds inflation and complicates the Fed's job.
  • That's why everyone is anxious about Wednesday's FOMC press conference, where Jerome Powell, the world's most powerful central banker, will either calm or agitate the markets. What to do? Well, it's all about Powell's speech.
  • Currently, the market is pricing in a more "reasonable" 75bps interest rate hike, compared to the more radical 100bps increase that was being considered as consensus a few days ago. If that happens, the bounce should continue.

But, even if Powell sounds nuanced enough, it's clear the market trend won't change until hard inflation data shows inflation is truly slowing down. Until then, we'll likely continue to slowly drift lower and if BTC loses $18k we're in for a ride.

Chart art: the sweet hopium.

It seems last week's reaction to August's serious inflation data was one of the worse since the 1970s. For the optimistic ones, it seems the market tends to bottom around such reactions!

Three things: the ruthless attack.

Tweet tip: the aggressive test.

When it breaks we will all capitulate.

Meme moment: the not-so-final hike.

There was once a time when central bankers proudly wore this sticker. But their monetary experiment clearly failed and we must now pay the price.

New newsletter: The Crypto Musings.

We will now transition to Twitter's Revue platform under a new brand: The Crypto Musings.

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Our newsletter offers opinions and insights from analysts in the cryptoasset space. It is not intended to be investment advice, and should not be treated as such. You must not rely on its information as an alternative to financial advice from a qualified professional. Without prejudice, we do not undertake or guarantee that its information is correct, complete or non-misleading; or that the use of the guidance in the report will lead to any particular outcome or result.