BTC Hits New Highs As Inflation Surges

Apparently things are becoming increasingly more expensive for most people. However, there are some crazy people like me (and most of you) that have chosen to store our wealth in Bitcoin and have seen the opposite effect as our purchasing power continues to rise.

The situation is very serious.

I’ll focus in on the US because, well, Canada isn’t nearly as important from a global macro perspective — the USD is the global reserve currency afterall.

Inflation is at a 30-year high, housing affordability is at its lowest level in 16 years, and the labour shortage has pushed wage inflation to a 30-year high.

Instead of shutting the party down as it gets out of control, the Fed has been doing this:

If you don’t like charts, here’s another way to put it:

The initial response by the Fed to the pandemic was warranted and possibly the right move. However, here we are a year and multiple vaccines later, and the Fed is still raging.

Over the years, central banks have shown that it is tough to control inflation. Reagan and Volcker did it in the 80s but under entirely different circumstances. This go around, exacerbated by a dramatic increase in money supply since the pandemic, we’re sitting at nearly $30 trillion in debt…even if the Fed were to raise rates — it won’t matter because they’re so far behind inflation. Let’s just pretend that real inflation number is 6.2% (it’s not) — what is a 50 basis point rate hike really going to do? 1%? It won’t matter. Remember when they had to stop the rate hikes in 2018 at 2.5% because everything started to collapse? Well, if we collapsed at 2.5% in 2018 we probably won’t be able to get anywhere near that now because we have so much more debt to service today.

Pay no attention to that man behind the curtain.

Just like when Toto the dog pulled back the curtains on “the great and powerful Oz” to find a random dude operating a bunch of controls behind a green curtain — people are quickly realizing that there probably isn’t really all that much going on at the Fed. It will be interesting to see how this all plays out but my hope is that more people catch on and position themselves for what could be a heavy, inflation ridden decade.

What we saw at the desk — by Dan Wright

I will skip right to Wednesday this week as that is where we saw the most price action. US CPI numbers came out hotter than expected printing at 6.2% — the biggest inflation surge in more than 30 years. This was the first time I have seen BTC/USD react to an economic report after its release. BTC screamed to a new all-time high once again hitting $69k. I am always wary of the big round numbers (in this case $70k) as potential resistance areas. Mid-afternoon we saw profit taking on the back of Evergrande news and price found its longer term support of $65k. November 11th was a bank holiday in Canada and the US which translated to lighter volume. BTC and ETH are still making higher highs and higher lows with a firm uptrend intact and room to run on the RSI as we see in the chart below. The big takeaway in this analysis is that a safe haven asset appears to have truly arrived.

In case you missed it…

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