Federal Reserve versus the UN and OPEC – Bitcoin Magazine
“Fed Watch” is a macro podcast, true to bitcoin’s insurgent nature. In each episode, we question mainstream and Bitcoin narratives by examining macro current events from around the world, with an emphasis on central banks and currencies.
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In this episode, CK and I cover a large part of the ongoing macro news. First we covered New York Federal Reserve President John Williams’ speech on inflation, then the UN report calling for central banks to change course and finally the OPEC decision to cut quotas by 2 million barrels per day (mbd).
Charts and Bitcoin Sentiment
Each week CK and I lead with a bitcoin chart to center our macro conversation from this perspective.
The daily chart from this week shows a slight bullish curl as it approaches the diagonal trend line. Several indicators are bullish, including more significant weekly and monthly signals.
The daily bitcoin chart shows bullish indicators
On the weekly chart, the first ever weekly bullish divergence has locked in. This does not mean that we cannot have further downside. If you look at the red columns on the chart below that indicate weekly bearish divergences, you can see that they often come in multiples. However, at the first sign of a weekly divergence, it signals that we are very close to the final reversal.
The mood in the Bitcoin ecosystem has started to shift from fear to being a bit more positive. If price can capitalize here and break out, we could see a significant shift to bullish momentum.
The first ever weekly bullish divergence has locked up
In this section, CK and I also discuss a possible bitcoin decoupling from stocks. The correlation has been quite high recently, but bitcoin offers some fundamentally different characteristics. As CK points out, exposure to a specific company’s earnings in a credit crunch does not weaken bitcoin. Where companies can face tough credit conditions, bitcoin does not. Bitcoin is actually benefiting from a flight away from credit risk.
How the Fed defines inflation
In this segment, I read several quotes from a recent speech by John Williams, president of the New York Federal Reserve. Most of it revolved around a funny definition of inflation, which Williams calls “The Onion of Inflation.”
The first layer of this onion is commodity prices, the second layer is the prices of products such as appliances and vehicles. The innermost layer of the inflation onion is – wait for it – underlying inflation.
There we have it: Inflation is an onion of different price layers. At the root is supply and demand and underlying inflation. No mention at all of money printing or degradation. I think what he intends to portray is inflation working its way through the economy. The prices of raw materials trickle down to products, in this case, which in turn trickle down to things like rent and labour.
The UN asks the central banks to stop interest rate increases
This week saw the release of the UN’s annual Trade and Development Report, outlining the current state of the global economy and making policy recommendations. Overall, I was surprised by the compelling nature of the report, and got a lot of things right. They even used terms like “superhysteresis” and shadow banks, ideas we’ve been talking about on “Fed Watch” for years.
We go through several quotes straight out of the report and agree with them several times. It is only when the UN comes to make recommendations that they lose us.
The political choices are straight out of the World Economic Forum or the communist playbook. They are full of phrases like “fair distribution of income” and “redistributive policy”. What they want the Fed to do is stop interest rate hikes that disproportionately hurt emerging markets, and instead use price controls and regressive taxation.
OPEC+ reduces the quota by 2 million barrels per day
A lot of this story doesn’t make sense to me. OPEC+ had an in-person meeting on October 5, 2022 and decided to reduce their oil production quota by 2 mbd. However, this comes as they are currently producing 3.6 mbd below their current quota.
Source: Commodity Context
Under the voluntary production quota cut, OPEC’s total voluntary quota in November is 42.1 mbd, but their production in August was 40.45 mbd. As it stands now, the reduction in the quota of 2 mbd, at current production levels, only reduces OPEC’s deficit. They will still have 1.6 mbd of space to increase production!
Some people calculate the new voluntary quotas by country, which results in a reduction of 0.86 mbd, mainly from Saudi Arabia, but the total is as mentioned above. I have called it voluntary because OPEC officials emphasized that these quotas were voluntary.
Wait, what? How is this some kind of emergency? It is not. CK and I wonder exactly why we’re seeing all the fear-mongering headlines we do from this story, and it boils down to election season timing and narratives.
This is a guest post by Ansel Lindner. Opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc. or Bitcoin Magazine.
