Aggressive actions

Based on how the stock market reacts to the Fed rate hike by basis points, you might think that risky assets are no longer in trouble. However, when looking at the big picture, it is obvious that this is far from the truth.

Last week, the Fed’s Open Market Committee (FOMC) decided to raise the key rate by basis points.

This is not surprising.

With inflation so high, the Fed has no choice. History will probably remember that they acted too late. This is the price to pay for sticking to the temporary inflation narrative.

But we cannot change the past. The only question now is how far will they go? Remember, FOMC members vote on projected rates over different time horizons. Each dot in the chart below corresponds to one vote per stake in each time period. The median of these votes (highlighted in red) is what I take to be the consensus over that period.

Take a look.

Means that bets can be expected to end up at 1,684% by the end 2022 of the year. At least if the financial markets do not collapse before this date.

For reference, this median target of 1.643% on the b. higher than what the scatter plot signaled at the end 2021 of the year. Let’s talk about playing catch-up.

So why am I saying that the financial markets are likely to crash?

Just look at the yield curve. It continues to move towards an inversion, which is a strong signal that a recession is approaching.

See for yourself.

In fact, this graph can be used as an argument in favor of why the Fed will aggressively raise rates.

Right now they’re playing catch-up. The Fed’s rate is practically zero, which means they have no way to intervene when the next recession hits. no matter what they do. Then it makes sense to raise rates as quickly as possible before the recession kicks in so that they can do something later.

If this is really what they mean, then it speed up the process of deeper correction of funds th market.

Currently S&P is on the verge between a standard drawdown and what is actually a serious correction.

S&P Card 10

If the Fed prioritizes fighting inflation and raising the rate enough to have room to maneuver, then the Fed rate could be lower, than expected.

This means that bitcoin should decouple from risky assets as soon as possible. Otherwise, he will be at the mercy of a major correction in the stock market.

At the moment, digital assets are in a dangerous zone. This is something to watch closely.

If we could see bitcoin return to its long-term trend of being an uncorrelated asset, it would go a long way in reinforcing the preservation of capital narrative.

This means that until we see the accumulation rate increase from 0.4 to 0.6, there is no point in betting on any long momentum.

To get there, we need to see again how larger addresses accumulate coins. Right now, the number of coins on addresses controlling less than BTC. Anything above BTC looks sluggish. Until the whales pass the hodling range set from August 2005 years, I don’t think bitcoin will be able to demonstrate any sustainable growth.

So we will continue to monitor the development of the situation.