Live from Consensus: Inflation Nation

Friday June 10, 2022 - Issue # 14

For those of you who didn’t make the trip down to Austin, you’re not really missing out on much. Once you made it past the first obstacle — Pearson Airport — you would have experienced a punch in the face when you felt the wrath of Austin’s weather.

The whole “Austin is the new Silicon Valley” narrative is puzzling. A tech hub with no cell service in the heart of the city. They do have those scooters everywhere which is nice… super techy.

Not me ^

Anyway, it’s nice to sweat it out with a bunch of people I’ve never met in person before and I’m looking forward to hearing a few presentations but enough about me.

May CPI came in as hot the forecast above at +8.6% yoy vs. +8.3% estimated. Huge monthly jump at +1% vs. +0.7% est.

As bad as that is for risk assets, I’ve been thinking about how some of us bitcoiners position bitcoin as an inflation hedge… Obviously, the current price action isn’t too attractive to folks looking at bitcoin now to save them dollars at the pump but maybe they’re just late. I think that bitcoin is the best hedge on inflation.

To put is simply, money printing leads to inflation. When you saw what was starting to happen with the Fed’s response to Covid — money printer goes brrr — we all had the opportunity to buy the inflation hedge at ~$10k (this number is conservative, and assumes you were a few months late).

When we meet with prospective investors in this current environment, they can’t seem to wrap their heads around current CPI prints and why bitcoin isn’t performing. It is probably the biggest objection we face.

But BTC did perform.

It got ahead of the totality of central banks’ response to Covid and went on a mind-melting run. So now that the Fed and central banks around the world have turned off the taps and are in the process of withdrawing the liquidity they pumped into the market, it only makes sense that bitcoin cools off.

Bitcoin is a counter to fiat money debasement.

If we’re going through an environment where central banks are not debasing their currency, then we can’t expect bitcoin to go ballistic during that phase. However, we can’t expect central banks to act responsibly long term. The fed will pivot at some point given global debt-to-gdp - it always has. Whether it’s Biden giving Powell a talking to before midterms in November or at some point into the future — the money printer will go “brrr” once again. For those interested in learning about historical fiat debasement I urge you to read Dalio’s Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail - tougher times but that is not my affiliate link.

Bitcoin is inevitable, but I think that we will better understand it’s health in its current place in history once we see how the hardest asset on the planet reacts to the Fed slowing down.