This is an opinion editorial by Tom Luongo, a former research chemist and financial/political commentator specializing in the intersection of geopolitics, financial markets, gold and cryptocurrencies.
The Federal Reserve is on the attack, but not against inflation. Oh, they say their shift in monetary policy is about inflation, but that’s a cover story for what’s really going on. There is a titanic fight for the future of not just money, but for humanity itself, and the Fed is in one corner of the ring.
Newly reconfirmed Federal Open Market Committee (FOMC) chair Jerome Powell and the Fed have a much bigger target in mind than any of its “usual suspects,” i.e., the “outside money” group of safe-haven assets: gold, silver, bitcoin.
If you are familiar with my work, you’ll know the answer to who that target is. If you aren’t, keep reading, and keep an open mind.
For now, bitcoin is caught in the middle.
The world is all a-Twitter (literally) over the Fed’s recent move to raise rates by 75 basis points (or 0.75%) across the board. I wasn’t. In fact, I’d suspected for a while that Powell wanted to go “75” but couldn’t politically.
Then he was “summoned” by President Joe Biden to discuss monetary policy. Now, we all know what this meeting was about. It was Biden, thinking he was still the Godfather, telling the Fed to back off before the midterm elections.
Going into that meeting I placed a 25% probability of 75 bps. So did the rest of the market.
Biden’s remarks afterwards about respecting the Fed’s independence while looking beaten raised that probability to 75%. The May consumer price index coming in hotter than expectations at 8.6% raised that to near certainty.
Not only did the Fed go through with the 75-basis point raise, it is talking about doing it again at the next meeting in late July. Sorry Biden, the real Godfather resides at the Marriner S. Eccles building, not the White House.
Powell has not only resumed his pre-COVID-19 hawkishness, but he’s taken it up a notch.
The stated reason was accelerating inflation. The May U.S. CPI number gave everyone quite a jolt. No one was likely happier with that number, however, than Powell. It gave him all the cover he needed to do what he wanted to do anyway.
The markets immediately reacted badly to the report: It was a “sell everything Friday.” Blue-light specials in capital markets that day were as common as bots lamely defending Biden on Twitter.
This selling included, of course, bitcoin. Simply put, falling U.S. dollar liquidity worldwide means falling bitcoin liquidity and then, by extension, seizure of one cryptocurrency market after another. With the insane amount of leverage existent within the DeFi space, it’s not hard to see what happened here and what’s just over the horizon.
If you still don’t understand the inverse relationship between HODLing and bitcoin volatility, then I suggest you review a basic course in supply and demand.
A lot of people…