In blue, we have Eurodollar futures inverted...
This pretty much reflects LIBOR...
What are we seeing?
Well, as US rate hike expectations hit their peak (there is now minimal chance of a hike in 2019 and 2020 hike chances are decreasing), we are seeing a reaction in Bitcoin...
This started back in December, but I really needed a full quarter to see if it were a valid thesis to base BTC bottoming on.
In fact, for May, the chance of a rate cut is now sitting at 8%...
To give further rise to the Fed not hiking, therefore there likely being an increase in dollar liquidity, the pace of WTI supply has been tightening of late.
What does that mean?
Well, there are two issues there.
The first being that it's likely aggregate demand has the market subdued - less demand for oil is caused by less goods being delivered and less goods being made...
The second is a lead on from the first...
The Fed are likely going to turn more dovish because of this.
Back at the end of Fed, Jerome Powell, chairman of the Federal Reserve, said, 'recent declines in energy prices will likely push headline inflation further below the... longer-run goal of 2 percent for a time.'
This is going to have a knock-on effect on the CPI measure, the rate of inflation at which the Fed base their policy decisions on, keeping inflation muted.
The issue here, however, on the dollar side is to do with money velocity, and I fear there is a big deflatory issue coming.
If money velocity (the amount of transactions occurring) declines during a period of expansionary monetary policy (as the Fed are entering into again now, most likely), then we can see deflation and not inflation.
The decline in money velocity could occur during a slow-down, and if we judge the inverted 2-10 yield curve as being a recessionary signal, alongside our signal of oil supply decreasing, then we could take this as being a deflationary sign... and have an effect on GDP too...
The effect on Bitcoin then could be large.
See, the Fed's desire to keep rates low essentially erodes away the risk free rate...
Which then causes money to be hoarded - not held in bonds.
If they're looking to cut further, we could be in a situation where there is absolutely no risk free rate and the attractiveness of an asset that is near a relative bottom arises... that being bitcoin.
Off the wall idea, but I hope you see the logic behind it.
This pretty much reflects LIBOR...
What are we seeing?
Well, as US rate hike expectations hit their peak (there is now minimal chance of a hike in 2019 and 2020 hike chances are decreasing), we are seeing a reaction in Bitcoin...
This started back in December, but I really needed a full quarter to see if it were a valid thesis to base BTC bottoming on.
In fact, for May, the chance of a rate cut is now sitting at 8%...
To give further rise to the Fed not hiking, therefore there likely being an increase in dollar liquidity, the pace of WTI supply has been tightening of late.
What does that mean?
Well, there are two issues there.
The first being that it's likely aggregate demand has the market subdued - less demand for oil is caused by less goods being delivered and less goods being made...
The second is a lead on from the first...
The Fed are likely going to turn more dovish because of this.
Back at the end of Fed, Jerome Powell, chairman of the Federal Reserve, said, 'recent declines in energy prices will likely push headline inflation further below the... longer-run goal of 2 percent for a time.'
This is going to have a knock-on effect on the CPI measure, the rate of inflation at which the Fed base their policy decisions on, keeping inflation muted.
The issue here, however, on the dollar side is to do with money velocity, and I fear there is a big deflatory issue coming.
If money velocity (the amount of transactions occurring) declines during a period of expansionary monetary policy (as the Fed are entering into again now, most likely), then we can see deflation and not inflation.
The decline in money velocity could occur during a slow-down, and if we judge the inverted 2-10 yield curve as being a recessionary signal, alongside our signal of oil supply decreasing, then we could take this as being a deflationary sign... and have an effect on GDP too...
The effect on Bitcoin then could be large.
See, the Fed's desire to keep rates low essentially erodes away the risk free rate...
Which then causes money to be hoarded - not held in bonds.
If they're looking to cut further, we could be in a situation where there is absolutely no risk free rate and the attractiveness of an asset that is near a relative bottom arises... that being bitcoin.
Off the wall idea, but I hope you see the logic behind it.
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