Investors Eyeing Central Bank Pivot

If one thing has been made clear over the last year, it is that crypto follows money flows.

As we are all painfully aware, crypto has been down-only since the Fed and other central banks began hiking interest rates. The hikes have been painful for stocks, crypto, the economy, and, worst of all, still aren’t effectively taming down inflation. Regardless, Fed Chairman Jerome Powell, has stated that he is standing firm in his fight:

But, do you believe him? We aren’t so sure. Especially with the UN calling on the Fed and other central banks to stop hiking rates. For context, the UN estimates that increases by the Fed have already reduced poor countries’ economic output by $360 billion over three years, with more policy tightening doing even more harm.

Now look, if you read into how the UN expects the US to fight inflation without raising rates, it is quite laughable. But, their point that the US raising rates will lead to a global recession is certainly worth taking into account.

That’s because if the US did force the world into a global recession by continuously raising interest rates, oil consumption would nosedive (as would the price).

That’s why today OPEC+ (which produces more than half of the world’s oil) announced that they have had enough with the Fed’s shenanigans. After last month’s cut of 100,000 barrels of oil a day, today they announced a cut of two million barrels of oil a day to keep a bottom in the price of oil. Simply put, the Fed and OPEC+ are playing a game of chicken with the world’s economy on the line.

The question is – who will break first?

A World In Flux

By now, you might be wondering to yourself: Okay, what does any of this have to do with the equities/crypto markets? 

Well, for starters, the market is always forward-looking. And based on the huge rally in equities over the past two days, it looks like it is starting to price in an interest-rate pivot.

Now, will the Fed actually pause? We don’t know. But if they do, everything (including bitcoin, given its steep ongoing correlation to equities) will, at least briefly, enjoy a wave of momentum.

Our main point, however, is that the global economy still remains in massive flux right now. As we just discussed, OPEC+ and the Fed are pretty much at war as of today. There’s a whole other war going on in Ukraine. The global energy outlook is a mess. Inflation is still rampant everywhere you look. Fiat currencies are increasingly volatile. And society’s distrust in governments is ever-increasing.

So guessing what bitcoin will do from here, beyond reacting to interest rates, is anyone’s guess. We don’t know. No one does. And that’s the point.

Bitcoin is truly in uncharted territory right now.

Whether it will become a more defined hedge against inflation, fiat collapses, wars, economic recessions, and everything in between is near impossible to predict right now. But with that said, a very real litmus test for Bitcoin’s utility is likely on the horizon. And it may just take another economic catastrophe for us to see how it plays out.