Wednesday, Nov 15, 2023

inflation, irrational expectations, weird BTC reaction

“Technology does not drive change. It is our collective response to the options and opportunities presented by technology that drives change.” – Paul Saffo ||

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IN THIS NEWSLETTER:

• Why bitcoin reacted strangely

• Inflation and irrational expectations

• Bank lending

• Logistics and politics

WHAT I’M WATCHING:

Why bitcoin reacted strangely

By now you’ll no doubt have seen the US October inflation figures – good news on all fronts, with a stronger-than-expected slowdown in both headline and core CPI increases. Even the so-called supercore measure, which also removes housing, rose at about a third of the pace in September month-on-month. Sticky services inflation seems to finally be cooling.

But, the reaction in the bitcoin market was kind of weird.

Risk assets celebrated, with the Nasdaq jumping 2.4% yesterday. BTC rose almost 1.5% on the news, but then dropped sharply, down to $36,000. It bounced, but then continued dropping. Bitcoin was not behaving like a risk asset that would benefit from higher liquidity.

(chart via TradingView)

Even gold jumped when the inflation data came out, and continued rising. Bitcoin was also not behaving like a hard asset that benefits from a weaker dollar.