U.S. inflation continues to slow, Bitcoin rises above $26,000 overnight
At 21 o'clock last night, the latest statistics on US inflation in February were released. The CPI annual rate continued to slow to 6%, in line with expectations. As soon as the data came out, Bitcoin rose straight from 24k to above 26k.
But sorry, this is just a blowout of short-sellers.
When the bell of East Eighth District struck zero, the market took a sharp turn for the worse. Bitcoin went all the way down from 26k to 24k before the data came out.
Bitcoin is back. However, some people never came back.
Last night, a short trader posted a last post on Twitter after he broke his position, saying goodbye to the world.
Across the screen, we can only silently pray that he is okay.
The timeline flashed back to 21:00 last night.
According to the US Bureau of Labor Statistics, "In February 2023, the US consumer price index rose by 6.0% year-on-year to 300.84 points, which was basically in line with the market consensus expectation of 300.86 points. The annual inflation rate slowed down for the eighth consecutive month, indicating that the Federal Reserve Inflationary pressures in the world's largest economy have eased after tightening policy over the past year."
20230315-01 Figure: US CPI 0314
“U.S. annual inflation slowed to 6% in February 2023, the lowest since September 2021, in line with consensus forecasts, compared to 6.4% in January. Food price growth slowed (9.5% vs. 10.1%) , while the cost of used cars and trucks continued to decline (-13.6% vs. -11.6%). In addition, the cost of energy (5.2% vs. Prices for electricity (12.9% vs. 11.9%) and housing (8.1% vs. 7.9%), on the other hand, rose faster. Core inflation, which strips out food and energy costs, edged down from 5.6% to 5.5%. On a month-to-month basis, CPI rose 0.4% after rising 0.5% in the previous month, also in line with expectations. However, core inflation edged up to 0.5% from 0.4%, compared with expectations for 0.4%.Inflation in the US still three times the Fed's 2% target."
20230315-02 Figure: US annual inflation rate 0314
When the US CPI data came out, I was having dinner with friends and chatting about this topic.
Market prices are not a function of data, but of the ratio of data to expectations.
Is the US CPI high? High. As high as three times the Fed's control target.
However, if the expected CPI is higher. So no matter how high the CPI itself is, as long as it is lower than expected, the market will rise in anticipation of less pressure on the Fed to raise interest rates. vice versa.
But things are far from that simple. Because the expected CPI is a definite value announced in advance.
The value that has been predetermined will be "priced in" to a certain extent and thus absorbed into the current price.
The price function becomes a higher-order function, from expectations to expected expectations.
If it is expected that the CPI will be higher than the expected value, so as long as it is not higher, it will exceed expectations, which will promote the rise. Otherwise, it is bad news pushing down.
If it is expected that the CPI will be equal to the expected value, so as long as it is lower than the expected value, it will exceed the expectation, which will promote the rise. Otherwise, it is bad news pushing down.
If it is expected that the CPI will be lower than the expected value, so as long as it is not lower than expected, it will fail the expectation, and the negative will drive the decline.
Expected expectations are information that no one knows.
Market prices are always affected by unknown information, thus presenting a chaotic trend.
The night was calm as usual. Silver moonlight poured on the windowsill.
Due to the explosion of the Bank of America, the Federal Reserve was forced to break through the bottom line to rescue the market. After this rescue, it is basically necessary to recover all the assets that have been shrunk and sold off in the past six months. This also means that the US dollar liquidity recovered by the Federal Reserve will return to the market again.
The original expectation that Powell would raise interest rates by 50bp in March has disappeared. It turned into an expectation of 25bp or even an overall rate cut throughout the year.
Powell made a living story when he sang the eagle before. He said that he will make a decision based on the macro data before the interest rate meeting in March.
The main macro data include the CPI.
The more CPI slows down, the less pressure the Fed will continue to raise interest rates. Powell also had more steps to go down, and turned around to print money to rescue the city.
Conversely, the tougher the CPI is, the Fed will be forced to cling to the political correctness of fighting inflation.
Therefore, when we saw the release of the CPI that continued to slow down last night, the market was greatly excited, and the tiger was leaping like a dragon.
However, the expected slowdown has been expected, so it can only be said to be in line with expectations, not to be said to exceed expectations. So after the market was excited for a while, it began to pull back again, and finally returned to the level before the data was released.
The reasoning seems to make sense, but in fact it doesn't make sense.
The complex and chaotic system is unsolvable at the scientific level of our human beings so far.
Price is always the biggest.
Just like Zhu Bajie’s line in Journey to the West: God’s arrangement is the greatest.
As for why God arranged it this way. You don't ask. Asked, no answer. What has an answer is also wrong.
Macro-analysis is a big trick before the event, and it is an afterthought after the event.
Investing by macro analysis is not enough.
Truth is often simple.
Admit that you are human and not a god, know that you are nothing in front of the market, and don't think that you have defeated the market all day long, which is the first step to success.
There is no room for immodestness in the market.
Every time you have a sense of pride, the market will ruthlessly sharpen it away for you. The wound was dripping with blood.
The best way to pay less tuition fees is to "examine myself three times a day", be alert to "whether you feel a little bit of complacency", and take the initiative to eliminate this complacency.
Eliminate a trace of complacency, and you will not be punished by the market once. In the end, you will enter the freedom of "doing what you want without breaking the rules".
When your investment is successful, you also cultivate yourself into a more complete and comfortable person.
Extra: The full book of "History of Bitcoin" has been released on leanpub https://leanpub.com/history-of-bitcoin
nostr: npub1dlwqsauewd56dekrnuxh8xukvg7pgeelwp39qah8ts5x28tmf7pqp5tcp3 twitter: @liujiaolian https://twitter.com/liujiaolian
(Disclaimer: The content of this article does not constitute any investment advice. Cryptocurrency is a very high-risk product, and there is a risk of going zero at any time. Please participate carefully and be responsible for yourself.)