September CPI rose 3.7% from a year earlier, above the 3.6% forecast. Producer prices jumped 1.3% in a single month, versus expectations around 0.5%. Bitcoin briefly slipped below $80,000 on Thursday, then recovered toward $82,000. The first reaction made sense: hotter inflation raised the prospect of more Fed tightening. The recovery is the part I find interesting.
I wondered whether someone at the Fed had talked the market back up. Thursday’s rebound began before Fed Chair Kevin Warsh spoke. Treasury yields had already fallen sharply, and equities recovered from their early losses. Then, in his Friday remarks, Warsh declined to signal an October hike, and traders reduced their bets on one.
With regards to bitcoin, I remain as bullish as ever. The Fed is staring at inflation that higher energy costs can push through the economy, while higher rates put pressure on the balance sheets carrying all that debt. The economy does not look great, the market is looking squirrely, and bitcoin is holding its ground through a historic rise in interest rates. I would rather own the asset with no committee deciding how many more units to create.