This is Fine

Bitcoin pumped a bit last week, what seems to be driving it?

In my opinion two major developments:

• RFK's endorsement of Trump, and
• Jay Powell's pre-announcement of rate cuts (coming soon)

1- TEAM OF RIVALS

In a moving, articulate and rather remarkable speech, RFK announced he'd be backing Donald Trump and excoriated the Democratic Party —of which he has been a lifelong member.

True to form, the mainstream media did their best to downplay and ignore him. CNN bracketed his speech as an explanation of what led RFK to drop out of his "quixotic quest" for the White House and cut off the feed mid-speech.

The speech was a fine piece of political oratory and —regardless of what you think of RFK's politics— is worth listening to in its entirety (I've provided a link below).

Many people hung on to this (admittedly solid and moving) line from the speech:

“What if we love our children more than we hate each other?” —RFK JR.

But the idea that really rocked my boat —as this sentiment is sorely missing in today's "sell your soul" flavor of politics— was the following:

“We talked about Abraham Lincoln's team of rivals. That arrangement would allow us to disagree publicly and privately, and fiercely… on issues over which we differ while working together on the existential issues upon which we are in concordance.” —RFK JR

Apparently this is not only a work-related philosophy, but one that carries over to home. RFK explicitly mentioned his wife's struggle with his decision:

"I made a political decision with which she is very uncomfortable." —RFK

Again, I encourage you to listen to the whole thing:

In the last weeks I'd seen many Bitcoiners split between whether they'd vote for Trump or for RFK (who is clearly ahead in the BTC learning curve), the divide has now been resolved.

While Bitcoin was not at all mentioned during any of these proceedings, it's clear that a Trump + Vance + RFK team would be supportive of —or at the very least not actively hostile towards Bitcoin.

2- ADJUSTING

Last week J-Pow hinted at rate cuts in the near future. Precise size, timing and pace of same depending on the ripeness of his plums incoming data.

He also mentioned:

• Looser policy could lead the economy back to 2% inflation, while maintaining a strong labor market (which he doesn't want to cool further).
• Economy continues to grow at a solid pace
• Upside risks to inflation have diminished
• Downside risks to unemployment have increased

First-order thinking is "lower rates are good for risk assets" because people seeking returns can no longer sit in "risk free" bonds (we'll come back to this), so the stock market seemed to welcome the news.

But there are several odd things about this whole situation.

First, rates are usually lowered in response to economic downturns or sluggish growth (with the goal of stimulating borrowing, spending, and investment).

Yet:

• The S&P 500 is near record highs
• Employment (allegedly) is running hot, and inflation, even the official numbers, are above the mystical 2%

So what's really going on? Maybe the numbers are bullshit?

4 out of the latest 5 months of jobs numbers have been revised downward with the latest numbers receiving the largest (downward) revision in 15 years.

Single-digit inflation numbers are certainly bullshit, which is easy to prove if you haven't given up on the habit of eating.

Delightfully, even in the MSM you can start seeing pundits push back against the bullshit narrative that food is expensive because of price gouging:

And, —I hope this doesn't shock you— it's not just food and groceries going up.

Rate cuts are likely to drive inflation higher, so why lower rates again?

The reality is the US can no longer afford high interest rates, they make their debt too expensive:

The difference between "expensive" and "too expensive" rates is spelled out neatly by Michael Burry, of Big Short fame:

And remember, the government doesn't just owe the interest (and principal) on the debt it has issued ($35 Trillion which could arguably be repaid by printing), it also owes its citizens Social Security and Health services which can't simply "be printed".

It's worth mentioning that many consider a loosening of Fed policies as a precursor to "firing up the money printer" —the Fed expanding its balance sheet which has historically driven BTC prices upward.

It's worth taking a moment to review what the above seems to suggest for the stock market specifically:

Notes on The Stock Market

Japan carry trade weekend crisis notwithstanding, the stock market has been BOOMING. Are we in the "up forever" phase now?

Remember a few paragraphs back we said "rate cuts are good for risk assets"? It turns out historically, the stock market has often reacted negatively to rate cuts.

The market's reaction is heavily context-dependent and can't easily be predicted by mortals at my pay-grade, but there's additional context (the yield curve uninverting, one more of those financial astrology things) which suggests a market correction might be due.

From where I'm sitting the stock market is overheated…

So the market seems caught between conflicting dynamics, on the one hand several indicators are signaling an impending (and in my opinion healthy) pullback, but on the other hand we have:

• A cardinal rule of politics: "don't tank the market if you want to get re-elected"
• The government's (heavy) dependence on capital gains tax as a source of revenue

So we'll have to wait and see how things shake out. Remember

• Markets are not "efficient"
• Markets are not "forward-looking"

Markets are fickle and stubborn and driven by multiple competing forces which wax and wane over different time-frames.

Moving on

Speaking of Capital Gains, Kamala is proposing to increase that tax to an all-time-high along with a batshit crazy bold plan to tax unrealized (paper) capital gains if you make more than $1M per year.

She also paid a bit of rather hollow-sounding lip service to "crypto" despite keeping Elizabeth Warren's "anti-crypto army".

If we step back and look at the big picture, I'm still extremely bullish on the medium and long term, for the precise reasons Dalio states below.

A growing portion of the market seems to recognize BTC's qualities as well:

And it's worth mentioning there has been strong selling pressure for Bitcoin which is coming to an end.

And if Microstrategy does get added to the SP500 —which it may— that could raise BTC's profile even more

Price News

August has been a wild and terrible ride for Bitcoin —if you had leverage.

"Wicks do the damage" is a perfect summary of why BTC and leverage don't mix.

A final reminder: Most of BTC's yearly gains happen inside of 10 days out of the whole year, staying in the sidelines hoping to catch the lows and highs is not a good strategy.

Bitcoin Surfing

Against my expectations Bitcoin boldly hopped back on the Board ($62.6k) and is trying to keep its nose out of the Water ($64.3k)

Dip Fishing

BTC jumped up 2 resistances and is currently banging its head against $64k. IMO we could easily see $62k and maybe $60k again $56k or lower would require a shock to the system, but those seem to be coming more frequently these days.

Calm Chart

The August monthly chart almost flipped Green after the Fed announcement and is now very modestly red, a nasty downward wick notwithstanding.