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[00:00:03] Q: DWill Bitcoin be Affected By Another Fed Rate Hike?ylan. We, we got a 9.1% CPI reading last week., what were your initial thoughts, reactions seeing that,
[00:00:17] Dylan: Yeah. I mean, I think it’s, inflation is, is still, is still running rampant., I think that’s, that’s mostly been, you’re starting to see the base effects of, of inflation come down a little bit, not come down, but we’ve seen commodities roll over,, in a pretty significant way., so I, I think that the, the year over year inflation could definitely have, have topped here.
I mean, I’m not a, I’m not running the data myself. I’m not, I’m not,, kind of the bureau of labor statistics. I’m not, I’m not actually calculating this stuff. ., but,, I think that,, you know what, what’s really the, the big key here is, is the labor market., that’s what the Fed’s kind of trying to squeeze out a little bit.
So inflation can still kind of like, I think you can, you can see it top out at nine, 9% or maybe it goes to 10, right. But. It’s gonna persist for a long time. There’s structural issues and, and commodity and energy markets., and, and, you know, the disinflation, the disinflationary era of the past is, is somewhat dead here.
There’s still,, kind of a lot to be worked out,, as we go forward.
[00:01:25] Q: So I just wanna remind everyone over on Twitter spaces that you will,, you’re able to see all of our pretty pre pretty faces. Jesus. I can’t talk. It’s Monday. So excuse me,, over on YouTube, we’ll be going over some charts in just a moment.
You know, look, gas prices for me have actually strangely gone down 50 cents a gallon. So I’m still sitting above $5. Like what is it in Nashville P for you and Dylan? What does it look like in Vermont?
[00:01:55] P: Man. I think,
I think for me it is just food prices. Like food prices are getting higher and higher and higher and,, it’s, it’s wild. It’s also interesting. It’s very interesting to me that, you know, I’m always fascinated by separate from what’s actually happening from how the official government narratives are shifting.
And so the more the government kind of acknowledges these increases in prices., that to me is almost a stronger signal than the actual prices themselves. So I feel like we’ve been seeing a lot more of that in terms of the public narratives that are being shilled.
[00:02:35] Q: Expand on that since you avoided the question. Sorry, Dylan. No, no. I
[00:02:39] P: was gonna say, I mean, food price is the thing for me. You said gas for gas has gone down for you, but,, you know, canceled cat food, which I eat constantly in, in order to stack more sat, save money., you know, that’s gone up and,, now h an food, obviously like, you know, fruit veggies.
I’ve just been very surprised that the, the cost, I, I ass e that has to do with fuel prices as well, but not sure.
[00:03:04] Q: Dope. Yeah. I mean, I just,
[00:03:05] Dylan: I just bought a moped, so I get 80 gallon. I had to get 80 miles a gallon. . Which you know, is great., I mean, I’m not sure about the actual gas prices. I don’t really look.,
[00:03:17] Q: but it must be nice to be that rich., all right. So let’s dive into some of these things. I., I’m with Dylan on the moped train.
I mean, to be honest, I’m looking at electric bikes myself, and then those electric bikes cost as much as used motorcycles. So I may not live to the end of this year, so I digress., we got the C CPI n bers in we’ve seen. People talking about Dr. Copper and the way copper prices are going commodities as P is meant.
Or as I mentioned, gas prices are starting to trickle down. You do see some food prices creeping up. I think it’s just a lagging effect of the high gas prices. That’s just my personal opinion though. Dylan, what are the things in the commodity space that you’re paying close attention to? Right.
[00:04:04] Dylan: Yeah, I mean, definitely looking at copper. Copper’s a really interesting relationship with inflation expectations., over the last decade, it’s like almost one for one like 10 year forward inflation expectations with, with copper., the copper to gold ratio, Lynn Alden likes to talk about it., it’s, it’s a really, if you overlay the copper gold,, ratio with, with like,, kind of industrial PMI,, you see a really, really interesting relationship there. In general commodity markets, I mean, energy, I think is, has rebounded today., we’re just in a different, we’re just in a different era, inflation. Yeah. I mean maybe the, the, the month over month of the year, over year, rate of change of inflation., can slow down, but you have to understand that in inflation compounds.
Even if inflation, you know, a year out from now is, is not 9%, but it’s 4%, you still have to take, you know, that 9% and multiply it by 4%., after that,, it’s, it’s only that kind of, that derivative,, of inflation that’s coming down. But, you know, in reality, everything’s getting more expensive over time.
I think, you know, we like to talk about just,, a big picture stuff. We we’ve our kind of thesis for, for Bitcoin., is, is kind of this asset. And obviously people say, Hey, Bitcoin’s not inflation hedge., it’s, you know, the market’s proven that in a, this Bitcoin is not a year over year CPI, cons er price, index, inflation, hedge.
But our view is that Bitcoin is a monetary to basement hedge., and when we we’re looking at kind of the, the global bond market, we still are of the belief that,, real yields over. Over the coming years will, will be,, held purposefully,, negative. Right? So, so fixed income as an asset class is guaranteed to lose you money.
Bitcoin’s obviously not doing great,, over the last, you know, year or so., but kind of, it’s still, it’s still over it’s 2020, you know, January 20, 20 opening price, whereas like the 60, 40 portfolios below that. Right. So,, I’m kind of veering all over the place here., we, we started talking about commodities,, But, yeah, I, I think that structurally commodities,, you know, we’re seeing just with the Russia, Ukraine war,, and kind of the reversal of globalization,, you’re gonna see a lot of pressure,, on, on commodity pressures for, for the long term.
But something like a recession, something like a, kind of a collapse in demand,, which the fed is trying to engineer. Those can certainly make an impact on the margin and lower those price.
[00:06:30] Q: I mean, look, we’re, we’re bouncing around a lot, but that’s due in large part because everything seems to be connected and intertwined with one another.
Look off of the heels of that CPI reading that we got last week, it seemed as though the potential for. A 75 basis point rate hike next week is actually diminishing. And the likelihood of a hundred basis point rate hike,, could be on our doorsteps. Could we talk a little bit just about where or what effect these,, the increase in fund rate could have on just the market, as we’ve seen it, as we’ve seen them progressively raise rates, we’ve seen the effect it’s had.
I mean, we’re in the midst of this bear market. What are your expectations? How are you preparing?
[00:07:16] Dylan: Yeah. I mean, the most interesting thing for me is, is that you’re seeing,, actually the, the bond markets, like calling the feds bluff,, and saying, if you look at like the eurodollar futures curve, it’s, and this is last week’s numbers.
So I couldn’t tell you exactly what they are today, but it has the fed funds rate topping out at like 3.8%, 3.9%,, this December. And then actually, if you go out to like next December,, it has the fed funds rate at, at around 3.2%., and so you’re seeing that actually the market’s expectations is that the fed actually cuts throughout 2023,, just on the basis that there’s just structurally way too much debt out there.
If you see, you know, the fed actually. Hike this, this far up, you’re gonna see kind of this, this huge collapse because of, because of how much debt there is and how much, you know, again, like the it’s a structural issue., so you kind of have this, this zoomed out view., and, and the reason why, like a lot of the Bitcoiners, or a lot of just the macro guys,, you know, despite what’s happened over the last four or five months, or, you know, what may happen the rest of the year, why they’re saying like, Hey, you know, it’s, it’s, it’s all one game and, and they’re gonna print again.
It’s. Of these, you know, big, long term structural issues of debt and demographics, which, you know, the demographic picture all over the world is, is super ugly. And so when you have these huge debt burdens and all these, kind of entitlements and promises,, that governments all over the world,, have given their citizen citizenry,, you know, it leads the, the central banks to only one,, you know, only one path, which is, which is kind of the more debate under the currency and, and, you know, printing up more IOUs to cover, to cover those promise.
[00:08:54] Q: So just for those who like me, how to quickly look up and make sure where we’re at., the current fed fund rate sits at about 1.5 to 1.7. So there’s still plenty of runway to go., . I mean, I wanna, I wanna really break this down though, Dylan and correct me if I’m wrong. If I’m ass ing that event that a lot of Bitcoiners are waiting for that reversal of the Fed’s position, this is, this would be that a decline in this federal fund implied federal fund rate would be that sometime in 20, 24, the market is expecting them to have to reverse their position.
So is that an accurate way of reading?
[00:09:34] Dylan: 2023. yeah. Oh, I mean, and you can, and you can go out and you can look at the Euro dollar features., originally Euro dollars was BEC it’s not, it has nothing to do with the Euro. It has everything to do with just the fact that European banks had dollar time deposits.
So,, Euro dollars,, the Euro dollars,, or the Euro, you know, Eurodollar futures is named after,, kind of. It was originally…
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