hey everyone and thanks for jumping back into the cryptoverse today we're going to talk about Bitcoin and the most recent CPI report headline inflation went up from 2. 7 to 2. 9% in line with expectations core CPI dropped from 3.
3% to 3. 2% which was slightly better than expectations if you guys like the content make sure you subscribe to the channel give video a thumbs up and again check out the sale on intothe cryptoverse premium at intothe crypto. com let's go ahead and jump in so one of the things that I've I've mentioned quite frequently over the last few weeks um was that with the labor market good news is bad news but as I mentioned on Twitter yesterday make sure you follow me there if you don't good news should be still considered to be good news and the reason for that is if you think about our discussions with the tenear yield and how as it goes up it's a headwind for risk assets the reason it was going up was because the labor market was doing pretty well and so the the the market had to ask itself the simple question well if the labor Market's doing okay why is the Fed cutting so much because if you remember the 10-year yield started to really go up right when the FED began to cut rates this right here right here you see that that was September that's exactly when the FED began cutting rates the 10-year yield has done nothing but go up since the FED started to cut rates so in that sense if the unemployment rate is dropping right if it's dropping or staying flat then or initial claims right initial claims have been dropping as long as the unemployment rate isn't skyrocketing the market has to then ask why is the Fed cutting with the labor market that's okay but inflation starting to go up right starting to go up if you look at inflation year-over-year you can see that basically it bottomed in September when the FED started to cut and now every month since then the the inflation rate headline inflation rate has been going up right it bottomed at 2.
41% then 2. 58 then 2. 73 then 2.
9 if you look at monthly change of inflation you can see that it was it it bottomed out the lowest change was back in August 2024 at least over over the last year so ever since then it's been going up and now it's been increasing by about 0. 15% 0. 16% for 3 months in a row now the reason why I I think you know the that Bitcoin is reacting this way and we we talked about this if if you go if you guys go back and watch the last few videos I said that there's a really good chance regardless of what happens that Bitcoin will eventually sweep this low right regardless of the ultimate outcome it'll eventually sweep this low and when it sweeps that low it should in the short term at the very least get a rally back up to the lower high structure the reason I say that is frankly that's what happened last year um and and also what we saw happen some in 2023 as well where Bitcoin will set a low eventually it'll sweep that low and then upon sweeping that low it'll then rally back up to the lower high structure now sometimes Bitcoin is able to break through the lower high structure and then other times it is not for instance last year about a year ago you could argue there was a lower high structure uh in place not as well defined obviously uh Bitcoin was ultimately able to break through it um but again there are times where it it it takes a little bit longer and so in this case the reason why for the labor market good news is bad news is because if the labor market is getting tighter then that's going to likely be a a head or a Tailwind for wage inflation and if wage inflation starts to go up then headline inflation basically everything else will start to go up again as well and so in that sense for the labor market we're we're in a period where good news is bad news because if if it comes in good it means the 10-year yield is likely going to Rally and we know that when the 10-year rallies after breaking out Bitcoin usually struggles for a little while especially the S&P struggles for a little while and you can see that's exactly what happened in 2023 right and almost the same exact setup in fact where Bitcoin had a you know a rally here and then eventually it faded back down and then it wasn't until the 10-year top that Bitcoin was able to begin it next leg higher you see that and that was because it topped for a good reason right it was I mean yelen was issuing shorter duration but also the unemployment rate back then was still relatively low even today it's not that High I mean it's still only you know 4.
1% but I I think that's the argument in this case is that in you know with labor market data good news is bad news because we're in a position now where the fed's cutting right if the FED weren't cutting You could argue that that relationship might not exist but because we've entered into the cutting cycle the cutting phase of the of the cycle of the interest rate cycle because of that I think that good news for the labor market has actually meant bad news um but with inflation it's the opposite with inflation good news is good news because if inflation drops then that means the 10-year yield will likely pull get a pullback as well and that's exact that's exactly what's been happening right I mean inflation today came in headline inflation actually went up so you might say well if it went up why is that good news the expectation was 2. 9% so it's in line with expectations it's not surprising in either direction right with the unemployment rate it came in lower than expected and that I think is what caused the 10e yield to rise so much with inflation headline came in at expectations core inflation actually came in lower than expectations right if you look at headline uh inflation the expectation was 2. 9% it came in at 2.
9% it is going up and we're probably going to have to deal with that in a few months and the Market's probably going to get spooked by it in a few months um but at least for the time being it came in at expectations now if you look at core CPI inflation rate year-over-year that actually came in better than expected it expected was uh 3. 3% last month was 3. 3 and it came in at 3.
2% so it's in line with what I was discussing yesterday on Twitter or X right and that's that good news with inflation will likely be in the short term interpreted as good news in the market and again the reason is because the 10e yield drops in this phase of the cycle when inflation is dropping and so I think that's sort of the next question I guess is how long will the tenure drop um it's hard to say exactly I mean you could look at at a couple of different analogues one of which is to pull up just not even looking at an analog but just to pull up the bull market sport band right so you know if you were to pull up let me go back over here I think I removed them on that page uh if you go back over here and let's just go ahead and and remove all this stuff um and we will get rid of that and we're going to switch this over just simply to the 10e yield where we can look at its own bull market support band and what you'll notice is that the bull market support band for the 10-year yield is right around 4. 2 to 4. 3% okay now I don't know if it's going to drop back down that low um but that is where it found support out the 21 we EMA in early December and you see that right there it was basically a 3 we drop into the 21 we EMA so if the 10year yield were to continue to drop this 21 we EMA in the short term will continue to go up so I would say there's always a chance you find the 10year yield back over here um at some point within the next few weeks seeing if it can hold support at the 21 we EMA or maybe just slightly above it sometimes after you know holding support at the 21 we EMA like like it did right here it did get a two- we pullback right there but it didn't actually take it back down to the 21 week EMA so you could simply just get rather than a drop all the way to the 21 21 week K it might end up being a higher low that's just above the 21 week EMA if it's to play out like that right if it's to play out like that and if the labor market continues to hold up and if inflation remains you know well within expectations so one of the things I mentioned though is that as it relates to bitcoin when it sweeps these lows it then usually rallies back up to the lower high structure and as I said yesterday that would correspond to roughly 100K roughly 100K in fact if it were to happen sooner rather than later it might even be closer to 101k um I think that the thing that the Bitcoin is really going to have to contend with is you know in the coming weeks in the coming months um is just whether inflation continues to go up or whether the unemployment rate continues to stay flat and not go up because the two big things right the two big things that markets will be concerned about in 2025 as far as I can tell will be does inflation continue to go up does the unemployment rate start to go up if you look back at the 1970s again there's sort of a similar idea where inflation bottomed out just below 3% and then it started to go up and as it went up the market didn't really care and then one month it went from 3.
86% all the way up to 4. 83% and when it when that happened the top for the market was in because the market then had to price in a second wave of inflation right you had one wave here you had a right translated Peak or sorry no that was a left translated Peak you had a a drop the S&P bottomed when inflation topped and then the S&P bounced here but then it topped as inflation started to go back up again and that is going to be the consideration for the markets this year and I don't really think that it's as likely that we see a repeat of the 1970s um but the market will at least ask ask itself the question if that could play out I'd like to think that we've learned our lesson back from back then but there's always a chance we have it right if the FED I mean if the FED just keeps cutting and and inflation just continues to go up then obviously we might just go through the same mistakes we made you know all those decades ago and and just get another wave of inflation but I'm hoping to remain optimistic and and not see a second W wave of inflation I think everyone would would prefer to not see inflation come back as it would make even you know it would make everyday living even more expensive than it already is and it's already a lot more expensive now than it was back in say 2019 before all the money printing began now if you look at inflation year-over-year per category we can begin to understand you know why did it go up um you know what's behind this recent surve of inflation you know just this steady this steady increase here's headline right here's headline so you can see that it's been going up since September if you look at food and beverages that's been slowly going up not a lot but slowly moving higher housing actually has been dropping and you could argue that the only reason that inflation is not as higher than it is is because housing makes up a a big contribution they're not all the categories are not actually weighted the same housing makes up a significant contribution of the overall inflation rate and that actually dropped if that were not dropping then headline inflation would be much you know it would be much higher but because that's dropping it's been you know it's been a good thing you know to sort of drag that inflation down remember housing lags housing lags apparel uh went up slightly but not not that much Transportation went up slightly it was deflationary not too long ago but now it's back to being inflationary Medical Care has slightly dropped in terms of inflation I mean medical care prices are still going up they're just not going up as quickly and I think a lot of people sort of misunderstand when I say that Medical Care inflation is dropping that doesn't mean that prices aren't going up they're still going up right they're going up 3% a year it's just that it's not going up you know 3. 25% a year which is what it was a few months ago and 5% a year or 6% a year which is what it was going up in September 2022 so prices are a lot higher they're just not going up as quickly um Recreation actually dropped education and communication dropped other goods and services also dropped so it's interesting that all the a lot of things are dropping yet headline inflation still went up and and one of the reasons again is if you look at the inflation year-over-year contributions per category you have to remember they're not all weighted the same right they're not all weighted the same and so you know here here's headline inflation but if you look at like food and beverage that's contributing 3 46% of the total amount right of the 2.
9 if you look at housing that's a that's basically 2third of it right there right 1. 82% of the 2. 9 that's essentially 2/3 of the contributions right there I think that's the reason why even though you see inflation dropping in a lot of categories um it hasn't budged a whole lot is because housing makes up a significant contribution so until housing really drops or really goes up you know you might not see any major moves by headline inflation you can also look at core inflation and see that we actually got good news there and remember with inflation right now especially with rate Cuts in place good news with inflation is good news in the market and you can see that inflation dropped from 3.
3 to 3. 2% so there's a little bit of Hope right there's a little bit of hope that maybe core inflation will start to drop below 3% and I think you know when when you're in a period like this that we've been in for the last several months since September when I told you guys in September that the dollar would likely rally and the 10-year yield would likely rally and that the 2-year yield would likely sweep this low and then rally we talked about it back then you can go watch the videos when we talked about it four or five months ago and you've been in this phase where the long of the yield curve is just on a massive tear higher it looks for any possible reason to drop any possible one and today you got it right you had inflation it came in line with expectations headline core inflation came in lower than expectations which the market perceives as a good thing and it is a good thing right I mean obviously we want to see inflation come back down so the other question is is what is the 10e yield going to do I think the argument is that well first of all no one knows because it's based on data that hasn't come in yet but I think that if inflation continues to go down then there's a good chance you could see the 10-e yield continue to to start to show some weakness the earliest I mentioned that the 10-year yield could top out would be January it could be later but if you guys go back to like what I was saying in September October I said it would it would rally until January at the very least right and and now we're going to get a new Administration coming in they're going to be dealing with you know other problems now you know as as as the market slowly change they're going to be dealing with with some of these issues um and then I guess what what'll be look what we'll be looking at over the next two or three months is what is the balance right does inflation continue to go up or does it stall out and start to go back down does the unemployment rate start to go back up or does it begin to come back down even more and again trying to get that soft Landing that the fed's trying to do is not an easy feat because they're they're constantly weighing the balances between you know the rising inflation and the rising unemployment rate and and you want to make sure you're not cutting enough you're not cutting too soon but you also don't want to wait too long so again it's easy for a lot of us armchair economists to sit over here and criticize every single move but the reality is you know it's now 2025 the unemployment rate's at 4. 1 and inflation still below three so there's at least a chance that things turn out okay but again we'll have to take it one month at a time to see where the data comes in my guess is that eventually we do get a landing but again timing is everything and and Landing The Landing could still be uh or sort of the final part of Landing could still be pretty far away right I mean if you think about what happened back in the 1970s when inflation started to go back up I mean even here it bottomed in January core inflation bottomed in January of 1973 you didn't get sort of a final major crash until the end of 1974 right so again the the business cycle just takes a long time to play out which is why I think your investing strategy should not be based on it right your your investing strategy is I as far as I'm concerned my investing strategy is just based on risk levels because I can't hope to know exactly what the market is going to do on any given day so I just stick to that but again if you look at at core inflation it has dropped to the lowest level that it's been at since what since July yeah in July it was at 3.
21% now it's at 3. 25 so it has dropped for the first time in a little while if you look at monthly change um you can see the last you know at least it was positive for the last couple of months so now it's negative so again the market is using this opportunity to go up because inflation coming in in line with expectations or below expectations is now perceived as good news especially with the FED cutting rates and now we will see what what Bitcoin does here as it approaches that lower high structure and again it's going to be you know if it depends on when it happens right but right now it would correspond to a little over 100k you know if it happens um a few days from now it could be right around 100K um but I mean you can you can see the chart I'm talking about right there and and again remember one of the things to consider is that in 2017 we found a low um around mid January before Bitcoin got a nice push for you know a number of weeks um but I I think the biggest Counterpoint with that is there was a lot more volatility back then right there was a lot more volatility and one of the things to consider back then in 2017 is when it when Bitcoin got that drop in January it actually it actually dropped to where it was in the summer of the prior year right back in the 700 right so it rallied all the way up to you know 1,00 and then it dropped back down to 750 if you think about it if you're thinking about the market today right it's basically just 100x that right instead of right instead of a rally up to um sorry I looked at the wrong one there instead of a rally here to one 110 one let me get it exactly so I'm not just clicking or something random right there but here instead of a rally up to 1,156 it was 100 times that right because now you have the rally all the way up to what was it 108 107 108 and then in 2017 the market dropped to 75 which was this the high from the prior summer which is kind of interesting because I mean you know if you think about like these highs from back over here was right around that 75,000 73,000 so it's it's not like there's a there's definitely some similarities in terms of the actual you know prices it's just like 100x multiplied I guess um but last year if you look in 2023 we we did see Bitcoin go down until the end of January you know so there's always a chance that it it just completely um repeats what it did last year as well a lot of times when you get these sort of these macro data points like inflation you'll sort of set a new trend until the next major data comes out right and and a lot of that is going to be in a couple of weeks right two to three weeks from now I I guess the first major thing is going to be the fomc um essentially two weeks from today so those are the next major events to sort of look at and see what the FED says um and and that could also be when the 10year yield sort of Finds Its next true dire direction right because the 10-year yield got a nice selloff today right a really nice sell-off and with the 10-year yield dropping it's good thing for risk assets as long as it's dropping for the right reasons and remember there's two reasons why the 10e yield could drop one is inflation's dropping that's a good reason for the 10e yield to drop another reason for the 10 year yield to drop is for the labor market to fall apart right the unemployment rate to Skyrocket that would be a bad reason so as long as the 10e yield is dropping for a good reason then Bitcoin likely goes up if it drops for a bad reason then Bitcoin would likely go down there's actually I think I was looking at this recently there was there was kind of a similar analog with with the tenure yield structure um I'm trying to remember when it was that I was looking at this you know it might have I can't I I can't even fully remember but I had found some analog at some point in the last couple of decades you know it might have been this one it might have been this one so if you look right here you can see sort of a a higher high structure right a high and then a higher high similar thing right here in between you had a low right so you have this low and then after setting this low you then went up here you put in a higher low you see this put in a higher low right there same thing is right there and then you went up and you you set sort of an intermediate high right there which is the same as that one we came back down we swept the low same thing right swept the low went back up swept the prior high right so you have sort of a double top a short-term double top that's a little bit lower than this top over here and you could argue that if the 10e yield is in off right here then maybe you have that same shortterm double top that's a little bit lower than the top over here and what ended up happening back then is the 10-year yield dropped to the to the bullmark support band I believe and we can pull it up um see right there the 10year yield drops to the bullmark sport ban and then it exploded higher okay so when it made that drop to the bullmark Spen in November or really I guess it it dropped down there in November 2005 um I mean it it basically hit it almost immediately it it stayed there for about a month or two and then rallied hard for about half a year about half a year so my base case has been that the 10e yield would likely top in q1 and so too with the dollar but that's one of those things where it's like you know it's a strong opinion but it's loosely held if the 10year yield were to fade here for a few weeks and find support at the bull Mark sportan around the same level that it did back over there then it could set up the 10e yield to you know to sort of get another move up um later on this year you know the market conditions are are not exactly the same which is why I I struggle to put a lot of faith into into some of these analoges for instance if you were to look at like the unemployment rate um and overlay it with a 10e yield back over here as the as the 10e Y got that final explosion higher right as it got the final explosion higher the unemployment rate you know had been going down throughout that entire period whereas with us this Market cycle this business cycle the unemployment rate has been moving up and and that's one of the reasons why I think analoges can be fun to look at and you try to use them to figure out what's the next move going to be but a lot of times they don't actually play out to the very end simply because the market conditions are slightly different right I mean it looks the same right it certainly looks similar as we just saw but there are other underlying things going on in the macroverse that are different right like the unemployment rate is was dropping over there over here the unemployment rate has been going up and if you look at the US inflation rate year over-year um back over here when this was going on thought I uh clicked on it um let me try again oh there it is so the inflation rate here's the thing that looks a little similar not not quite but I mean a little similar in terms of where we are because right when the um you know right when the 10year yield sorry right when inflation you know started to go back up again that was when the 10e yield went up again as well okay so I mean that's kind of the question you have to ask right is inflation just going to find support around just below 3% and then get another move back up say into the 3% to 4% range or even the four to 5% range if that happens then you would likely see the 10-year yield go higher but if the unemployment rate continues to slowly go up then it would make me believe that inflation uh might not be as big of an issue as it was back then and or as bad as it was back in the 1970s that'll wrap it up guys thank you for tuning in make sure you subscribe give video a thumbs up and again check out the sale on into the crypts premium at intothe crypto.
