Before significant interest rate hikes, I have claimed that Bitcoin is decoupling from the rest economy (which probably happened).
However, the effect of rising interest rates still had some power over the Bitcoin in the tank.
It seems that this power of raising interest rates is diminishing for Bitcoin relative to the rest of the economy which will probably suffer quite a bit more after this post.
The chances of Bitcoin being affected by raising interest rates are becoming lower and lower.
The bitcoin community is pricing in these hikes a lot earlier than the rest of the market. The same thing happened when inflation started (2020), when Bitcoin moved significantly quicker than the CPI.
My estimate is that the Bitcoin public generally sticks (as do I) to the rule that Inflation is defined as an increase in money supply and deflation is defined as a decrease in the money supply.
These numbers are available much quicker than CPI (Consumer Price Index) which is a trailing indicator and can lag 15-24 months on average.
The same thing happened in reverse now.
One more important point is that monetary inflation is much more difficult to reverse through rising Interest rates, and the community is also aware of this. In my previous posts I have explained how interest rates cannot curb inflation (even in theory) unless they overshoot the current CPI number, which at the time was over 9%.
Interest rates could have bigger effects at <9% rates only if they break the economy (which slowly might start happening), but this will still not be enough to reduce the money supply.
This could stop further inflation at <9% interest rates, however at the cost of economy. What they cannot do is reverse inflation, meaning that all the money that is in the system will stay in the system and prices will not come down. Killing inflation this way will be paid for through increased poverty and decreased standard of living, until the economic growth "eats" through that "debt". Which at a 2-3% rate could take multiple years.
If we account for all of these effects and consider the Bitcoin community world views, the chance of further fall is very low, while the stock market still has a lot of down room.
Comment
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Money is a fundamental medium of exchange of information and value. It connects everyone in society into a global computing network, composed of the combined processing power of all the people in the world. It is essential that the money supply is fixed, or at least stable and predictable so that our global „supercomputer“ could easily compensate for errors. Accumulation of these errors could lead to massive mistakes and instability and there is a high probability that most of us won't be able to learn what the problem was even after the fact. Our monetary system is corrupt. It is equivalent to an idiot banging on a computer with a rock and tasing the motherboard, and expecting it to work faster or better. Our governments also don't help with centralized price control, import/export control, or exchange rate control. Every such action creates ripples of errors through the system. and those errors will be extremely hard to trace and could impact parts of our economy and society that are seemingly disconnected from one another. It's a butterfly effect, and we don't have the computing power to trace each step to the source of the problem.
I'm moving 100% of all my assets and savings into Bitcoin. By the end of 2023. I will close all my bank accounts forever. Also migrating all my business to the Bitcoin standard. The race is over, Bitcoin won.
The overall environment is still too bearish for me, I have my $$$ on the sidelines and I'm going short somewhere between 22-24k should it bounce there.
josip
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@rareMeerkat41139, Well yes, the FED is probably weaponized and used against Russia. The point of this post was to explain how FED doesn't affect Bitcoin anymore relative to every other currency and commodity.
If the effect is strong enough, Bitcoin could still lose some value against the Dollar, but not nearly as much as every other currency and commodity. That's why there is an even stronger confirmation now that Bitcoin is indeed decoupled from the rest of the market.
SwallowPremium
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Interesting view, I probably agree with you!!
Badgergrease
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Great assessment and application of common sense, not just charting. My personal thinking is that at these low prices its far more about who is holding all the coin and their plan, not just the general state of the market, the economy or standard charting predictions. They have an effect of course, but not the major influence they once had. Thank you for your view, you’ve gained a follower.
josip
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@Badgergrease, Thank you very much, I hope you will look at my previous assessments too. I am trying to implement a "holistic" approach. I'm mostly guided by Milton Friedman and Thomas Sowell. I have studied Physics and Chemistry but somehow got stuck in Economy. A lot of the things that I write is me trying to explain my "gut feeling". I don't think that technical analysis is useless, but it is a "vudu" magic that often supplements my entry points. If you look at technical analysis as a visual representation of game theory, there are certain periods when they can actually predict human behavior. But in order to implement those strategies, you need to be very certain that there are no other significant factors (like wars, FED involvement, significant political engagement etc.)
I have been successful with charting and technical analysis During 2020. and 2021. but since the end of 2021. I have ignored technical analysis and only implemented my general understanding of monetary system and global trends. Time will tell if this was a right decision. There is still a chance that FED is actually weaponized and could be used as a weapon to attack Russia at the cost of global economy and destruction of wealth. This could render my Bitcoin analysis temporarily useless, but it is so unpredictable that we shouldn't count that in our analysis.
If such a thing happens, it will be a temporary struggle, but the recovery will be inevitable.
josip
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I'm moving 100% of all my assets and savings into Bitcoin. By the end of 2023. I will close all my bank accounts forever. Also migrating all my business to the Bitcoin standard. The race is over, Bitcoin won.
Tradersweekly
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Why would you suggest that rising interest rates are not affecting Bitcoin anymore? That is somewhat contradictive since it continues to mark new lows.
josip
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@Tradersweekly, My thesis was mostly based on the observation that the Bitcoin community prices in low interest rates and high interest rates at a much greater speed than the rest of economy. Therefore, the conclusion was that Bitcoin found its bottom quicker than the rest of the market. Change in interest rates has a delayed cascading effect. Bond markets are affected almost immediately. Stocks finish their moves in about 6-8months and goods and services experience it within 12-18 months.