“Fed Watch” is a macro podcast, true to the rebellious nature of bitcoin. In each episode, we question Bitcoin and mainstream narratives by examining current events in macro from around the world, with an emphasis on central banks and currencies.
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In this episode, CK and I cover a lot of the ongoing macro news. First, we cover New York Federal Reserve Chairman John William’s speech on inflation, then the UN report calling for central banks to change course, and finally OPEC’s decision to cut quotas at 2 million barrels per day (mbd).
Bitcoin charts and sentiment
Every week CK and I start with a bitcoin chart to focus our macro conversation from this perspective.
This week’s daily chart shows a slight bullish curve as it approaches the diagonal trend line. Several indicators are bullish, including more significant weekly and monthly signals.
On the weekly chart, the first weekly bullish divergence has been blocked. This does not mean that we cannot have more disadvantages. If you look at the red columns on the chart below that signify weekly bearish divergences, you can see that they often come on multiples. However, at the first sign of a weekly divergence, it indicates that we are very close to the final reversal.
Sentiment in the Bitcoin ecosystem has started to change from fear to being a bit more positive. If the price can capitalize here and break out, we could see a sizeable shift into bullish momentum.
In this section, CK and I also discuss a possible decoupling of bitcoin from stocks. The correlation has been quite high recently, but bitcoin offers some fundamentally different properties. As CK points out, bitcoin is not weakened by being exposed to the earnings of a specific company in a credit crisis. Where companies can face tough credit conditions, Bitcoin does not. Bitcoin actually benefits from a flight away from credit risk.
How the Fed Defines Inflation
In this segment, I read several quotes from a recent speech by John Williams, president of the New York Federal Reserve Bank. Most of it revolved around a playful definition of inflation, which Williams calls the “inflation onion.”
The first layer of this onion is the prices of raw materials, the second layer is the prices of products such as appliances and vehicles. The innermost layer of the inflationary onion is, he hopes, core inflation.
There we have it: inflation is an onion of different price layers. At the root is supply and demand and underlying inflation. There is no mention of money printing or degradation at all. I think what you’re trying to portray is inflation working its way through the economy. Commodity prices trickle down to products, in this case, which trickle down to things like income and labor.
UN calls on central banks to stop rate hikes
This week saw the launch of the annual United Nations Trade and Development Report, in which they outlined the current state of the global economy and provided policy recommendations. Overall, I was surprised by the compelling nature of the report, getting a lot right. They even used terms like “superhysteresis” and shadow banking, ideas we’ve been talking about at “Fed Watch” for years.
We reviewed several quotes directly from the report and found ourselves agreeing with them several times. It is only when the UN comes to make recommendations that they lose us.
Policy options are straight out of the World Economic Forum or the communist playbook. They are full of phrases like “equitable distribution of income” and “redistributive policies”. What they want the Fed to do is stop rate hikes that are disproportionately hurting emerging markets, and use regressive tax and price controls instead.
OPEC + reduces quota by 2 million barrels per day
Much of this story makes no sense to me. OPEC + had a face-to-face meeting on October 5, 2022 and decided to reduce its oil production quota by 2 mbd. However, this is because they are currently producing 3.6 mbd below their current quota.
Under the voluntary production quota cut, OPEC’s total voluntary quota in November is 42.1 mbd, but its August output was 40.45 mbd. As it stands now, the 2 mbd quota reduction, at current production levels, only reduces OPEC’s deficit. They will still have 1.6 mbd of space to increase production!
Some people are calculating the new voluntary quotas by country, resulting in a reduction of 0.86 mbd, mainly from Saudi Arabia, but the total is as stated above. I have been calling it voluntary because OPEC officials emphasized that these quotas were voluntary.
Hope for? How is this some kind of emergency? It is not. CK and I speculate as to why exactly we see all the scary headlines we make of this story and it comes down to election season timing and narratives.
This is a guest post by Ansel Lindner. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.