Bitcoin Forum

Legacy and the cryptocurrency markets have rebounded today after the latest CPI print came out as expected with 3.4 - down a little from the previous month with 3.5 during March.

You can see how it currently looks in this bar chart, https://www.investing.com/economic-calendar/cpi-733

If the CPI prints another small decrease during the next report, both legacy and cryptocurrency markets could surge to new all time highs. But to play the devil's advocate, isn't the sudden change of mood to extreme bullishness also inflationary?

explain please

And again and again, crypto bounces when inflation shows a decline after falling during months of high inflation.
How many nails are there already in the coffin of the theory that Bitcoin does great in times of high inflation, war,  disasters, and economic downturns?


The more I watch the reactions and the price movements after this news came out the more I believe crypto has become infested with bots that trade based on market news like forex is right now, one keyword in the press and they go full swing, this almost never happened years ago but lately it happens every single month the moment it hist the newspaper the volume and the price pick up. So I don't really know if it's a bullish sentiment or it's an induced bullish feeling.

 

the CPI data shows the inflation of goods and services. A higher consumer Inflation on foods usually mean that people pay more on food and less on risky assets like cryptocurrencies or stocks. And a reduce inflation will mean that people can have more to spend on this assets. That’s why the news of an increase in inflation causes bearish sentiment and vice versa. The CPI data reduce from 3.5% to 3.4% and the market reacted with a pump.

It is worth mentioning that some people buy more bitcoin during inflation times as it is seen as an hedge against it.


What I think is crypto is been treated as forex today by the vast number of perpetual or future traders we have than the old method of investing and long term holding. The spike that happens after news like this is to me caused by them just like the forex speculators

I wouldn't call this bullishness because it is still small and only too soon to say. The impact of a 0.1% decrease is not significant enough to bring all the money that went out of the market, back to the market and create a rally to reach ATH.

Also the problem is not inflation alone, the actual problem is still as it has been so far: a combination of both inflation and recession.
People are earning less money + have to spend more money on goods and services + and at the same time pay higher interest on their loans. The combination of these things mean they have less money to invest in anything, least of which is something as volatile as bitcoin. While also having to liquidate their assets (eg. sell their bitcoins) to cover their increasing cost of living.

Because with the presumption that the CPI might keep going down, giving an opportunity for Powell to achieve his "Soft Landing", then there's also the tendency that markets surge and people start spending money like a drunken sailor again because "everything is going to be OK". But let's wait for next month's CPI print after the market and the people's positive reaction for the current month.

Don't forget with Sell in May and Go Away (https://bitcointalk.org/index.php?topic=5496469.msg64077260#msg64077260), even Bitcoin price now reach $66K just because of CPI index dropped for 0.1%, people might dump their coins because they believe in sell in May theory. The market isn't yet mature since it can easily driven by unimportant news. So, there's a chance Bitcoin price will dump below $60K in near end of the month.

So far, Bitcoin is doing well pricewise, but I don't believe there is such a strict correlation between inflation and Bitcoin price, between Fed interest rate and Bitcoin price, or any other similar things. Sometimes Bitcoin behaves similarly to the stock market, and sometimes it doesn't. Sometimes major global disruptions affect it negatively, and sometimes they don't.
Bitcoin is just too unpredictable.

That's right, for bull season to really come, we need more good news. The fact that CPI decreased by 0.1% and the market is reacting positively is just a temporary exaggeration. But with news that inflation is showing signs of going down, we can expect inflation to drop below 2% soon and the Fed to lower interest rates soon. In particular, people are more optimistic and believe that the Fed will lower interest rates twice this year as inflation is gradually being controlled.

Although the overall situation of the economy is still in a bad phase, I think it is no worse than the 2022 crisis. And we can also see bitcoin has also recovered and surged from $15k to $66k despite the economic uncertainties. Therefore, if the Fed lowers interest rates twice this year, it is likely that we will also have bull season this year.

Although the correlation might be stronger or weaker depending on the situation, it can be debated that because of more and more investors from traditional/legacy finance are going into Bitcoin, the correlation could be becoming stronger and stronger. It could also be true especially during these periods when plebs in Bitcoin Land are becoming more aware of such things as CPI, Rate Hikes, and QE/QT.

Since the reduction of the Consumer Price Index is significant the reduction of consumer price also indicates low inflation, there are predictions that the Federal Reserve will reduce interest rates from June to September. Which means more money in the hands of American citizens and the potential of saving and investing. If the US Central Bank reduces interest rates for few times it might trigger a price increase.

It is now clear that the Bitcoin market is highly connected to the US economy. A good economic condition in the US will mean a high price and vice versa. A war or natural disaster in the US may trigger a crypto bear season. No country's economic or political conditions affect Bitcoin price like the US not even El Salvador.

Inflation has only shown signs of being "sticky" not signs of going down.
For it to go down the chaos in the world has to calm down, energy prices have to come down, the supply chain disruptions have to stop, etc. then we can start seeing inflation start coming down and then we can see them lower the rates. None of it is happening yet though.

So you are saying that the economy (inflation + recession) in the rest of the world is fine and it is only US economy that is affected by these things?!
Shall we take a look at G7 countries in 2023?

Country	|	Inflation rate	|	Interest rate
USA	|	4.1%	|	5.33%
Canada	|	3.8%	|	7.2%
UK	|	5.2%	|	5.25%
France	|	5.7%	|	3.5%
Germany	|	5.9%	|	3.5%
Italy	|	5.9%	|	5.0%
Japan	|	3.27%	|	0.1%

The only deviance is Japan and Canadian interest rate but the rest are pretty much the same.
Things are worse in smaller economies. This is why Bitcoin is affected, because the economic crisis is a global event not a local thing limited to US economy.

Whether the market reacts to a news like the US CPI is a different matter that doesn't mean there is a "connection". It's just weak hands panicking/FOMOing after reading something in the news.

Seems very likely that the Fed cuts rates this year at least once now which is bullish for stocks & crypto. The economy is finally heading in the right direction, nature is healing. We are all set up for a big bull market in 2025.

But a "price increase" of what? Prices of assets in the stock market and cryptocurrencies? It will, BUT it will also cause a price increase of goods and services simply because there's more money in circulation. What would the Federal Reserve do if the CPI starts printing hot again? 

¯\_(ツ)_/¯

A decrease in CPI prints has its own advantages and disadvantages. Looking at it closely, a decrease in CPI prints will benefit the consumers. CPI prints decreasing will allow consumers to buy products and services at much lower prices.

CPI prints can actually be used to assess which investment one can make. But like you said if it decreases too suddenly, it might not be as beneficial as it looks like.

More purchasing power will result in higher demand and if the supply can not keep up it might inflict inflationary tendencies.

CPI is an inflation index, a decreasing CPI index means inflation is decreasing . How can a sudden drop in CPI cause a supply shock and a rebound in inflation ? I really don't understand what you are saying .

I don't know how the government comes up with the final result of the CPI, but it is an inflation index and the Fed will rely heavily on it to decide whether to lower interest rates or not . The sharper the CPI falls , the faster it shows that our economy is recovering .
But I don't think CPI will fall below 2% this year anytime soon , and it won't be difficult to have a bullish season this year because CPI is falling quite slowly .

windfury keeps assuming bitcoin is dependant on US financial news for the reasons of bitcoins dips/surges, he has many times try to promote nonsense linkages of coincidence.

however that same day coinbase exchange had some access issues which has in previous events always caused dips and surges of people panic buying coin to get coin out of an exchange due to fears of exchange liquidity

in short the coincidence of a market change vs a news event has more causality relation to the 'coinbase outage'  rather than CPI report

but with that said the 'surge' windfury mentions is not a large change in comparison to other movements of the past.
bitcoin prices are not naturally stable, but the change of the 14th was not one of extremes

Not just bitcoin and even other financial markets like gold and stocks, you can also see that they all reacted positively to the recent CPI news. And after all, bitcoin is just a part of the world's financial market, so it will obviously be affected. To be more precise, bitcoin or gold are just financial tools and are invested in by people, and macro news is directly affecting investor psychology. So, I don't see anything wrong in saying that bitcoin price is affected by news about CPI, inflation, war...

This is not the first time so I can't say it's all just a coincidence, wait for the next CPI announcement or the Fed to lower interest rates, I don't expect you to continue calling it a coincidence.

I do not think that in the crypto world sudden changes to bullish market would be considered "inflationary" because we are not printing more suddenly. That is what inflation means, the devaluation of a currency, and bullish market literally means we are not devaluing, we are getting higher in value.

So, what I believe is that if this keeps going, then we are going to see people increase their investments to bitcoin eventually, making it a lot better for us to invest into it. Obviously, it is not going to be right away, this is why I always prefer to wait until Q4 before I worry, because I will accumulate in other three quarters, and on the fourth quarter I usually end up seeing an increase, lets see if that will be the case again this year.

ok lets play spot the difference of the last 6 months
tell me when the last 6 CPI announcements were and the exact day the markets reacted in association with the up or down of the CPI
(hint: question is rhetorical, but for you to research/find out and realise.., heck ill give you some hints)
https://talkimg.com/images/2024/05/17/1vkBa.png


May 15, 2024 (Apr)    08:30    3.4% ⇩
Apr 10, 2024 (Mar)    08:30    3.5% ⇧
Mar 12, 2024 (Feb)    08:30    3.2% ⇧   
Feb 13, 2024 (Jan)    09:30    3.1% ⇩
Jan 11, 2024 (Dec)    09:30    3.4% ⇧
Dec 12, 2023 (Nov)    09:30    3.1%

I don't want to start a new topic about this yet so I'll ask here: what do you guys think about the new stupid "tariff war" the idiots in Washington are starting with China?

I think the last biggest time (which could be categorized as a "tariff war") was in Trump administration and the Chinese retaliation put an stop to it because US economy couldn't withstand it. But back then US economy wasn't experiencing inflation+recession at the same time like it is today.

 ::)

You're probably right, but the market is made up of people who often become irrational. So although the market always returns to a state of efficiency, there definitely are times that dips and surges happen because of irrationality caused by bullish news, bearish news, greed, and fear.

Plus did I actually say that it's absolutely "dependent"?

¯\_(ツ)_/¯

I agree with what you said, real inflation has not improved too much and is still high. But CPI in April was at 3.4% and lower than before. Looking at that, we cannot be said that inflation has not shown signs of decreasing, it has decreased but quite slowly.

In addition, I think if we wait until the world situation calms down, energy prices decrease, supply and demand are not interrupted... then make the decision to reduce interest rates, I think interest rate cuts will never be possible. Because interest rates are being maintained at too high a level today, it is also said to be one of the many reasons making it more difficult for the economy to recover. Maintaining interest rates at high levels is no different from a double-edged sword, it can curb rising inflation but will also make the economy more stagnant, even falling into recession. So I think that's why the Fed still needs to cut rates first and there will be at least one or two rate cuts this year.

That's true but I'd say "signs of decreasing" is what we saw in the second half of 2022 where inflation rate came down from 9.1% in June to 8.3% in July (0.8% decrease in 1 month) and continued going down consistently every month until it reached 3% a year later (6% decrease in a year). But it has been "sticky" ever since, going up and down from 3% to 3.7%.

0.1% decreased in one month is not like that in my opinion, specially as long as it stays above 3%. However if we see another reduction next month, and see inflation at something like 2.9% it could be a positive sign and we can hope for a possible interest rate cuts.

But if the Federal Reserved does cut rates, won't that cause reinflation, then therefore Jerome Powell would need to increase rates higher than 5.5%? That would be worse than the economy and make the "soft landing" less probable, which already IS improbable in my opinion.

Another reason why United States will not lower interest rates in the foreseeable future is all the "debt" they've sold to stupid countries who would buy those bonds.

You see when interest rates are high, US government also has to pay a high interest on the bonds they sell stupid countries (one of the reasons they print $1 trillion every 100 days). If they lower those rates, that means they will also pay those countries less interest. That means the incentive for those countries to baghold these things go down quickly and they WILL start dumping them. That is US debt they would be dumping and the damage on US economy that is experiencing inflation and recession would be high.

Therefore FED has to keep the interest rates high to keep the incentive to baghold this garbage up and continue printing trillions to pay those debt bagholders until the day they can handle that inevitable dump when the rates are cut...

BTW have you noticed how China has been continuously dumping? They were once bag-holding more than $1.3 trillion of US debt and today that is down to $0.76 trillion despite the high interest rates... this is not a good sign (is Taiwan invasion imminent?)
https://ticdata.treasury.gov/resource-center/data-chart-center/tic/Documents/slt_table5.html

A change of 0.01 is insignificant, a rounding error almost and oftentimes these can be corrected in later months when more data becomes available. What is useful to know is the general trend and whether it starts to plateau or we see spikes upwards again. It's a good sign that inflation may be coming under control and that interest rates might start to drop again. Who knows how that will effect bitcoin though, as it reacts very erratically. What we will see is money becoming more easily available again and lower borrowing rates for cash, which some speculators might choose to drop back into crypto. It's all a big guessing game at the moment and one small external jolt could jeopardize it all.

Yes I saw it rally and I looked at the CPI print and was surprised it was only a surprise number off by 0.1%. I am thinking that the markets are just illiquid in May and they swing high and low in both directions on insignificant news.

I don’t know why they treat the monthly CPI as important when in the past we had very low inflation one month and the next month very high inflation. A better indicator would be perhaps a 3 month average which is smoothed out over the longer term.

PCE lower month-on-month - which indicates that inflation might be going lower, caused a surge in legacy markets and liquidated the short-sellers. 👍

But PMI was also lower month-on-month - which creates fear that a contraction in the economy will probably happen, caused traders to sell and liquidated the long-buyers. https://cdn.imgchest.com/files/6yxkca3aae7.jpeg

Today the bank of Canada finally lowered interest rates by 0.25%. It’s scary what will happen next. Will it be a repeat of the 1970s where they cut rate too early and we ended up with inflation higher than the previous pivot?

The cpi is still not at the target rate of 2% but it’s trending down. So maybe they made the correct move but if still spurs massive amount of people buying real estate and causes rents to go up higher then I cannot see this ending well.

Wonder if the USA will cut rates sometime this year. Their CPI is also far from their 2% target.

It is worth mentioning that the interest rate was lowered from 5% down to 4.75% which was high considering we are talking about 3.5% rates here. But I don't think we can predict the outcome of it at this point. Not to mention Canadian economy has major differences from US economy, which also means consequences of lowering rates is not of the same type.

Hopefully recession stops so we can see bitcoin price rise smoother with less sell pressure.

It will all depend on the health of their economy and with recent indicators such as CPI, PPI, unemployment rate reports...all pointing towards the Fed having 2 interest rate cuts this year. But as we all know the Fed is still very cautious to make a final decision and waiting is what we can do for now.

Besides Canada, there is also notable news from ECB that they may also start reducing interest rates this week, and if this happens, it will likely be a driving force and catalyst for the Fed to consider lowering interest rates.

Personally, I'm optimistic about the Fed lowering interest rates this year because at least this year they have a presidential election.

https://www.euronews.com/business/2024/06/04/ecb-expected-to-cut-interest-rates-this-week-what-you-need-to-know

https://www.talkimg.com/images/2024/06/06/cGCxq.png

People who have waited for a 0.25% cut to buy real estate will top if the price goes over 5%, for them, it will make no sense to have waited that long for a moment to buy at an advantage and then pay extra for that asset. The threat of a rebound in inflation when everyone is aware of that threat dies down by the day, there is a limit to how much it can bounce.

Besides, I find it funny how some are already preaching the end of the Western economies because wow, a cut of 1% in the interest rate will be catastrophic to the 3% inflation, how about we look at BRICS for example:

All of them except China which is facing deflation have way higher both interest rates and inflation, so what will happen if countries that are 3 times worse than the US will try to cut them?


Yeah, how bad this is for the US, meanwhile in your country:

Zimbabwe vibes, quadrillions...