October’s CPI and crypto market

Another nugget of news that’s been neglected recently is the lower than expected CPI numbers for October which came in last Thursday.

This was literally in the middle of the FTX Alameda Fallout, so it was an easy headline to miss but it’s one that requires a few comments for starters.

This positive CPI print is the reason why the stock market and even the crypto market saw a recovery rally last week, the fact that the stock market continues to rally while crypto continues to crash just goes to show you how bad the FTX Alameda situation is for crypto.

It also suggests that the crypto market could be headed much lower in the coming months.

This is because the stock market and the crypto market are highly correlated and though that correlation has been broken.

For the time being it’s still lurking in the background and it will bite you if you’re not careful.

There’s a good chance that we will see a second leg lower in the stock market, this means that the crypto market will go down with it but it ultimately depends on whether the current trend of lower inflation continues.

That’s because the markets have been crashing in response to the FED’s interest rate increases and the FED has been raising interest rates in response to inflation.

It’s too soon to say for sure whether inflation is actually coming down but it’s safe to say that investors are becoming more optimistic on that front.

The caveat is that if investors start to expect that inflation is coming down but it suddenly starts to rise then the market crash will be that much more brutal, I suspect this is exactly what will happen over the winter months when energy use around the world spikes and the shortages become acute.

There’s also lots of uncertainty about the United States’s strategic petroleum reserves, China’s zero covert policy and the ongoing war in Ukraine.

All three of these negative macro factors could theoretically be resolved in the coming months but this seems unlikely for the time being.

In short inflation is likely to continue and this means that the FED and other central banks will continue raising interest rates this will cause a global recession and possibly one that’s deeper than most investors are pricing in.

This will also cause crypto to crash but create an opportunity for accumulation.

Regardless I reckon it’s wise to stack fiat currencies during times like these.