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The PCE section ties it together. Core inflation accelerating while Bitcoin is in a 54% drawdown is the data that kills the "inflation hedge" narrative on this cycle's evidence. But the narrative was always stated wrong. Bitcoin doesn't hedge CPI inflation. It hedges monetary debasement. Those are different things and they produce opposite outcomes depending on the policy environment.
Right now CPI is high because supply shocks and energy costs are persistent. The Fed is tightening in response. That tightening crushes the leveraged buyers who drove Bitcoin's last rally. Bitcoin hedges the environment AFTER the Fed gives up fighting inflation and starts printing to cover the fiscal deficit. That's what happened in 2020 and 2021. We're not there yet. We're in the painful middle stage where inflation is high, the Fed is hawkish, and Bitcoin takes the hit from the tightening while getting none of the benefit from the debasement that comes later. The thesis is right about the destination. The path is where all the damage lives.
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Love this visualization of the last 30 days, I seen a lot of people display this but I think this is my favorite one. Nice work.
good one. I also had some thoughts here.
https://rudajev.substack.com/p/episode-35-dear-bitcoin-your-biggest
The PCE section ties it together. Core inflation accelerating while Bitcoin is in a 54% drawdown is the data that kills the "inflation hedge" narrative on this cycle's evidence. But the narrative was always stated wrong. Bitcoin doesn't hedge CPI inflation. It hedges monetary debasement. Those are different things and they produce opposite outcomes depending on the policy environment.
Right now CPI is high because supply shocks and energy costs are persistent. The Fed is tightening in response. That tightening crushes the leveraged buyers who drove Bitcoin's last rally. Bitcoin hedges the environment AFTER the Fed gives up fighting inflation and starts printing to cover the fiscal deficit. That's what happened in 2020 and 2021. We're not there yet. We're in the painful middle stage where inflation is high, the Fed is hawkish, and Bitcoin takes the hit from the tightening while getting none of the benefit from the debasement that comes later. The thesis is right about the destination. The path is where all the damage lives.