“Fed Watch” is a macro podcast, true to bitcoin’s rebellious nature. In each episode, we challenge the mainstream and Bitcoin narratives by examining current macro events around the world, with an emphasis on central banks and currencies.
Watch this episode on YouTube or Rumble
Listen to the episode here:
In this episode, CK and I cover a lot of the ongoing macro news. First, we covered New York Federal Reserve President John William’s speech on inflation, then the UN report calling for central banks to change course, and finally the decision of OPEC to cut quotas by 2 million barrels per day (mbd).
Bitcoin Charts and Sentiment
Each week, CK and I start with a bitcoin chart to focus our macro conversation from that perspective.
This week’s daily chart shows a slight bullish curl as it approaches the diagonal trendline. Several indicators are bullish, including the most significant weekly and monthly signals.
Bitcoin daily chart shows bullish indicators
On the weekly chart, the first weekly bullish divergence has been recorded. That doesn’t mean we can’t have more disadvantages. If you look at the red columns in the chart below that signify weekly bearish divergences, you can see that they often come in multiples. However, at the first sign of a weekly divergence, it does indicate that we are very close to the ultimate reversal.
Sentiment in the Bitcoin ecosystem has started to shift from fear to a bit more positive. If price can capitalize here and break out, we could experience a major shift to bullish momentum.
The first weekly bullish divergence has been blocked
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 exposure to a specific company’s earnings in a credit crunch. Where businesses may face tough credit conditions, bitcoin does not. Bitcoin actually benefits from a flight 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. Most of it revolved around a funny 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, wait for it, core inflation.
There we have it: inflation is an onion of different price layers. At the root is supply and demand and underlying inflation. No mention of money printing or degradation. I think what it’s trying to portray is inflation making its way through the economy. Commodity prices trickle down into products, in this case, which in turn trickle down into things like rents and labor.
The UN calls on central banks to stop rate hikes
The annual United Nations Trade and Development Report was released this week, in which they describe the current state of the global economy and offer policy recommendations. Overall, I was struck by the compelling nature of the report, which got many things right. They even used terms like “super hysteresis” and shadow banking, ideas we’ve been talking about on “Fed Watch” for years.
We go over several quotes directly from the report and find ourselves agreeing with them several times. It is only when the UN comes to make recommendations that we lose.
The policy choices 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 the rate hikes that are disproportionately hurting emerging markets and instead use price controls and regressive taxes.
OPEC+ reduces the quota by 2 million barrels per day
Much of this story makes no sense to me. OPEC+ held 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.
Source: Commodity Context
Under the voluntary production quota cut, OPEC’s total voluntary quota in November is 42.1 mbd, but its production in August was 40.45 mbd. As it stands now, the 2mbd quota reduction, at current production levels, only reduces OPEC’s deficit. They will still have 1.6 mbd of room to increase production!
Some people are calculating the new voluntary quotas by country, which translates into a reduction of 0.86 mbd, mainly from Saudi Arabia, but the total is as stated above. I say voluntary because OPEC officials emphasized that these quotas were voluntary.
Wait What? How is this some kind of emergency? it is not CK and I speculate exactly why we see all the fear headlines we do about this story and it comes down to the timing and narratives of the election season.
This is a guest post by Ansel Lindner. The opinions expressed are entirely my own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.
