Markets Readjust To Robust Economic Data, All Eyes On CPI: TBL Weekly #31
We've got you covered on all the latest in bitcoin and macro.
Welcome to TBL Weekly #31—the free weekly newsletter that keeps you in the know with everything going on in markets. Let’s dive in.
Bitcoin-Macro Monitor
Just quickly grabbing the headlines? Here’s your rapid-fire recap of the relevant action in bitcoin and macro:
Refer to TBL’s Bitcoin & Macro Term Glossary: thebitcoinlayer.com/glossary
Markets Analysis
The spread between 2s and Fed Funds tightened considerably this week, from -46 to -23 basis points, a sign that the Fed is not caving to market pressure (the inversion) by rushing to pause. Economic data has been relatively strong of late, and rates have had to adjust to the new reality that imminent recession talk was possibly premature. Terrible business sentiment, evidenced by mass layoffs and poor manufacturing new orders, is now joined by stubbornly sticky wages, rising consumer sentiment, and decent services new orders—rates traders that were pricing in a 75% likelihood of a pause are now adjusting that probability well below 50%, causing them to sell some long positions in Treasuries.
Bitcoin’s price fell back below our key technical area of around $22,700 and promptly lost another thousand dollars. Broader interest rates have risen materially of late, and that might be flowing through to other asset classes. While bitcoin/equities correlation remains elevated, it continues to marginally fall—an interesting development we have our eye on. Bitcoin is back above its realized price (trader cost basis) but still below its Electricity Hash Value (TBL metric to measure miner cost basis). It is safe to say that bitcoin has not fully reemerged from the pain of Fed hikes and restricted liquidity. How can it, when the Fed is busy convincing market participants it is far from done?
To the price action in Treasuries: both 2s and 10s have risen right to or slightly above their key technical areas. The 2-year yield closed the week dead on the 4.52% area we’ve been watching, and 10s closed the week above its descending trendline from October but still below its 3.9% local high at 3.74%. Don’t miss the chart pack from earlier this week to break down these important levels.
Those short on reading material should check out this week’s Fed paper release, titled The Bitcoin-Macro Disconnect—it’s all about bitcoin and rates, and how rates are the sole macroeconomic determinant of bitcoin’s price.
…from a macroeconomic point of view the only direct determinants of Bitcoin are present and future interest rates. - NY Fed Research
Now you know why we here at The Bitcoin Layer cover rates just as much, if not more than we cover bitcoin.
The Week Ahead
In the week ahead, we look forward to Tuesday’s CPI release. Annual inflation is expected to fall from 6.5% to 6.2%, but the market will be most closely watching the monthly core number, previously 0.3% and expected to rise to 0.4%. Any deviation from these expectations is sure to move markets, and we know that with rates, equities, and bitcoin all hanging around very important technical areas, all four of our eyes (and eight if Nik and Joe are both wearing their glasses) will be on Tuesday price action. There is a ton of important economic data from Wednesday through Friday that is also potentially market-moving, but it’s difficult to look past Tuesday’s CPI with any sense of what the market will be watching. We will likely have a full chart pack for you by the end of the week to capture everything that might have changed in the economic outlook.
If you’re enjoying today’s analysis, consider supporting us by becoming a paid subscriber. As a paid subscriber, you get full access to all research as it drops.
Here are your quick links to all of the TBL content for the week:
Tuesday
With the past week of Fed speak, I had to step away from all the rhetoric and get back to basics—price charts. Today’s chart pack will be a pure price study, narrative-free until the end.
Yields across the world have, since late October, been tracing out a top. With the peak in yields now at least a quarter year behind us and a sudden pop in yields over the last few days, prices require refreshed analysis. Where are we now?
Check out Greatest Hits, Daily Candles Chart Pack
Wednesday
In this episode, Joe sits down with Kenny Florian, a former mixed martial artist with the UFC, a contestant on the first season of The Ultimate Fighter, and a color commentator for the PFL.
Kenny discusses his journey into MMA, how the concept of pushing your limits and earning it translates into bitcoin, as well as some upcoming fights:
Thursday
Last week, the Bitcoin protocol was altered forever when a 3.96-megabyte block was hashed onto the blockchain at block height 774628. The reason for this unusually large block is one that gives most longtime bitcoin proponents pause: a .jpeg image. The opining about bitcoin’s end-of-days are misplaced, however. As the Bitcoin protocol grows into a global financial settlement layer over the next several decades, valuable and increasingly expensive block space makes any attempt at bloating the blockchain with still images a seriously expensive form of attacking Bitcoin.
Check out Ordinal Inscriptions & Fears of Clogging The Blockchain
Friday
In this episode, Nik & Joe sit down with Joe Carlasare, a Partner at Amundsen Davis working in bitcoin & blockchain litigation, and the newest addition to our team as the Legal Correspondent.
Joe, Joe, and Nik discuss current litigation across the crypto industry, what GBTC will signal about bitcoin's direction, action in rates, and his thoughts on where markets are headed in 2023:
Our videos are on major podcast platforms—take us with you on the go!
Apple Podcasts Spotify Fountain
Keep up with The Bitcoin Layer by following our social media
YouTube Twitter LinkedIn Instagram TikTok
That’s all for our bitcoin and macro recap—have a great weekend everybody!
The Bitcoin Layer does not provide investment advice.