hey everyone and thanks for jumping back into the crypto ver today we're going to talk about the most recent CPI report we're going to be looking at headline inflation core inflation and of course how it could be affecting things like Bitcoin if you guys like the content make sure you subscribe to the channel give the video a thumbs up and also check out the sale on intothe cryptoverse premium at intothe cryptoverse decom headline inflation actually came in a little bit above expectations if you go over to this website you can see that the forecast for this past month was 3. 1% for headline inflation but it actually came in at 3. 3% uh which is also continuing it's a continuation of the prior Trend I think that the thing that the market is is trying to wrap its head around right now is that we know the FED started cutting interest rates in September of 2024 and what you notice is that headline inflation has been going up since September of 2024 now ultimately the market I think is trying to wrestle with the idea of are we going to get a soft Landing or a hard Landing we've talked previously about what hard Landings could look like and it could involve the inflation rate just skyrocketing once again personally I hope that doesn't happen that's not really something that I I don't really think any of us want to see happen I think going to the grocery store and spending twice as much as we were spending in 2019 on the same things is already hard and I I don't really think it would be good for that to even get worse if you look at the 1970s just to keep some context you can see that inflation headline dropped below 3% and then as we got closer to the postelection year headline inflation started to go back up and you'll notice that it's it first started to go up and the market didn't care and then as it continued to go up the market started to get a little concerned and then one month it went from 38 to 48 and then it ended up leading us into a left translated cycle where the peak occurred in December of the election year or or when it happened again in January of the postelection Year rather than having a peak near the end of the postelection year or the beginning of the midterm year and so we want to see obviously a right translated cycle um but with inflation creeping higher the market has to ask itself you know has the FED done enough and hopefully they have uh we're going to talk about some of the good things with inflation even though it's been going back up but it's not clear yet right it's really not clear yet if the FED has and that might be one of the reasons why the stock market has stalled out a little bit in in recent months is just simply because inflation just continues to slowly go up now when we think about breaking inflation down by category we can get a better understanding of what's actually causing this right so this is what headline inflation looks like um if you look at like food and beverage inflation it's going up slightly but it's still right around 2 to 2 and a half% so I don't I wouldn't really consider that that concerning housing continues to drop now remember housing I believe is contributing like 2third of overall CPI um like shelter and so this one coming down is a good thing but I suppose it's a little concerning that it came down a good amount this past month but headline inflation still went up if you look at apparel it's at 0.
5% or so so well where it needs to be Transportation has been going up it's back up to 3% but my guess is just doing something like what it did over there Medical Care has went back up to three now it's falling that's a good thing recreation still below to education and communication 05 other goods and services also one of the larger categories that's lagged the most uh had a nice drop from 3. 26 down to 2. 38 so we're actually seeing inflation fall in a lot of these different areas and so while it might look like we're gearing up for another wave of inflation I don't necessarily know that that's true uh one of the things we've talked about a lot is how is one of the differences is that you know back over here in the 1970s when inflation really started to pick back up it was when the unemployment rate was in sort of a macro downtrend right if you were to look at um you know if we were to go over to the workbench here and add on here a couple of different metrics like let's add in the inflation uh rate year-over-year and also We'll add in uh the unemployment rate so one of the things you'll notice back in in the 1970s when we had those waves of inflation you know the wave of inflation that occurred right here was after the unemployment rate had been going down for a while right and in the later in the 1970s when you had another wave of inflation it was after the unemployment rate had been going down for a while but this cycle while it's true that inflation has or while it's true that the unemployment rate has kind of stalled out in recent months it's not like it's been going down for a while so while it might seem like it's playing out like the 1970s and it could still seem like that for a while while longer I actually don't necessarily think that's the most likely outcome I know there's a lot of people that sort of overlay this Spike here with this one um and to be honest they do look pretty similar right I mean you could draw the analog and see that if it just keeps following course they'll be another wave of inflation but I don't know like I I don't I don't necessarily believe that that's the most likely outcome as long as the FED doesn't cave you know to political pressures and aggressively cut interest rates more than they really need to um so you know I could see a scenario where the market gets spooked that that's what's going to happen but at this point it's not it's not a base case it could become my base case right I mean if they uh if they cut rates to zero and turn the money printers back on then absolutely it would be my base case but it just seems like it it it could be the Market's initial reaction to the rate cuts but if you look at expectation for future rate Cuts they're they're just getting pushed further and further out right the market right now doesn't even think we're going to have another rate cut until the end of October um so I mean it makes sense to see inflation go up a little bit as the FED Cuts rates but I I don't necessarily know that it it's going to see a a major spike in the same way now that doesn't mean you can't get a spike in the unemployment rate at some point um you know there's two macro things you have to manage right you have to manage uh manage the inflation and you have to manage the labor market and they're they're hard to manage together you know because as inflation goes up you can't cut rates therefore the small businesses that are counting on lower lower rates you know they get it becomes harder and harder for them which can lead to layoffs right but if there's too many layoffs then that affects earnings which would then cause the FED to then cut rates the question is is do they wait too late so in this case um inflation you know it did come in a little bit hotter than expected I don't really know that sort of the coming in above expected is a big deal as it is that it's just been going up since the FED started to cut rates and at what point are we going to see this level out right we can want it to level out but how long until there's more evidence that it's actually going to right there always exists a scenario where the unemployment rate starts going back down for a little while lead leading to more wage inflation which can then be sort of put pressure on overall headline inflation but I think that's sort of the reason the market is is somewhat spooked is because really since September the market the inflation rate has gone from 24 to 26 to 27 to 28 29 and now up to 3% and if you look at a monthly change of of headline inflation it's been pretty consistent right I mean really since the FED cart rates right there the monthly change has been about.
139% then1 143 then 0. 158 then 0. 127 so it's just slowly going back up ever since the FED cut rates now one of the things I mentioned is that if inflation comes in hot then it would likely cause the 10-year yield to go back up now it looks like that's what's happening if you look at the 10-year yield it sort of looks like what's happened is the 10year yield had this area right here that was struggling to break through it then eventually broke through it and now it's potentially holding support at that level which by the way happens to correspond to the 21 we EMA you'll notice similar patterns uh previously in this cycle where there were sort of breakouts then retests the of the uh 21 we EMA um you had one of those basically right here right sort of an attempt to break out an attempt to break out and then it finally did and then it came back down and back tested that 21 we EMA so you could argue that it's done a couple of times here right up to the 21 kma through it back to the 21 kma now remember a lot of times when the long and of the yo curve tops out it eventually is a sweep of a prior high and that doesn't even mean that this is the high that it'll eventually sweep it could be that it goes to a higher high and then sweeps that high later on but my point is that there there's a chance here that that the 10year yield goes back up to to five% and and sweeps the prior high from October of 2023 and if you look at um you know if you look at at what happened in 06 uh there was kind of an interesting s similarity where you have sort of a a a peak and then a lower high and then you sweep that high go back to the bullmark sport fan and then you get a big move up do you see that so if you zoom out here you can see what I'm talking about right so you have your initial High I mean you can even just expand this line over and see that it's not even that far off off from that high right there and then you have sort of a lower high right and then you sweep it which is exactly what just happened and then you go back to the 21 we EMA which is what just happened and then it goes all the way up here right then the the 10year yield went from like 44 which is is where it just hit and it went all the way up to over 5% right it went over to 5% and then eventually it swept that high you see and that's what I'm saying right like you know there there is a chance that this is the high that it sweeps and then it's over but there's also a chance that if it plays out like you know 06 07 that it it could go to a higher high above 5% and then sweep that high later on I don't you know I for for me I I think a sweep at this high would probably cause enough um pain in the short term in Risk assets and you know if you're curious how this affects Bitcoin remember last or in 2023 Bitcoin was also struggling as the 10-year yield went up and then Bitcoin began another move when the 10-year yield topped right it was right here when the 10year yield topped that Bitcoin started to go back up again and so I think you know as as the 10year yield was going up Bitcoin was struggling here right as the 10e yield was going up to 5% Bitcoin was struggling which is exactly what's happening today right Bitcoin has been struggling as the 10year yield is potentially making this moved back up to 5% so you know it's important to remember that as long as the long in goes up there's a good chance that Bitcoin can can falter and can struggle whenever the 10year tops there's a good chance that Bitcoin would find relief as long as it's topping for you know a reason that isn't immediately concerning right like in in October of 2023 the 5year topped but it was right around the time that Yellen issued shorter dur than the market was expecting um and it was both back then it was basically just um a good reason to to sort of look at the market look at Bonds in a different way and say well look yields are probably going to go down here um because because of of sort of the changes and expectations and and that wasn't a bad reason for it to top out you can have bad reasons for it to top out I mean like in um you know like in 2018 when it topped out we saw the markets drop a lot uh in 2008 when it topped out here right or 2007 the markets dropped a lot but when it topped out right there the market cycle the business cycle still wasn't actually over right if you look at like the S&P 500 when the 10e yield put in sort of the first top it corresponded to a correction right it corresponded to a correction but it wasn't actually like the top the top occurred when it came back down and then swept the high right that that's more or less where the the the major business cycle top occurred and so that's why you always have to pay attention whenever the 10year yield is sweeping a higher a prior High you could almost argue um in fact it might be prudent to argue this that if you want the business cycle to go on longer it might be better for the 10year yield to go well Above This High signifying that the economy is still relatively strong if it tops out at that high then who's to say it's not just what happened right here where you know this is your July 06 and then this is your you know your July or summer of 2007 right so like this would be October 2023 and then this could be sort of the next one which then leads into a recession so you would almost argue that it would be better for it to go well above that high to then say hey like the economy is actually stronger than than most people give it credit for um that that would that would be an interesting way for it to develop and I I could be on board with that path you know I could certainly be on board with that path um it would allow certain things and say like the crypto vers to to catch bids later on this year if that's the case things that have been bogged down for so long because as we going talked about yesterday right everyone's either it seems like most people are either in Bitcoin or mcoins not a lot in between it might give that stuff in between uh a chance to finally make a move that's a little bit more encouraging if the 10-year yield uh kind proves that this is not like that that level is not actually the top and then it's just downhill from there so we'll see what the tenure yield does my guess is that as long as the 10e yield is going up Bitcoin will likely struggle whenever the 10year yield tops that's where Bitcoin could catch a bid so long as it's not topping because we're heading into a recession right um you know as long as it's not this type of a top where it just kind of sweeps the high and then goes into a recession that would obviously not be good so those are my views right now though on on the asset class on bitcoin and remember I mean you know in terms of thinking about right translated or left translated in order you know in order to get a a right translated cycle you need for the inflation rate and the unemployment rate to be well behaved um you don't want the inflation rate skyrocketing like in the 1970s you also don't want the unemployment rate skyrocketing either and so it it's a dance that the FED has to you know has to maneuver around and hopefully hopefully they don't mess up one of those two metrics as long as those two metrics are well behaved there's always hope of a right translated cycle with a peak later on this year if either of those two metrics go up a lot if there's a big spike in the inflation rate or a big spike in the unemployment rate then the odds of a left translated cycle would go up a lot in which case you know it would take longer for for things to get back on track but anyways guys that'll wrap it up for the video thank you guys for tuning in make sure you subscribe give the video a thumbs up and again check out the sale on into the crypts premium at inth crypto.
