Ecoinometrics - Fed pause and BlackRock Bitcoin ETF

Lots of news but no game changer.

If you have been following crypto for a while you know that waiting for the SEC to approve a spot Bitcoin ETF in the US is like waiting for the Fed to pivot…

And now we have another heavyweight of finance, BlackRock, putting forward a proposal for a spot Bitcoin ETF. Is there any chance this will be the one? Do we really need a spot Bitcoin ETF? And what would that do to Bitcoin’s price if the product was approved?

We’ll discuss all that below. But first let’s quickly review what came out of the FOMC meeting.

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A pause but no pivot

But it [FOMC decision in July] will be data driven. I can’t tell you that I ever have a lot of confidence that we can see where the Federal Funds rate will be that far in advance.

Jerome Powell, Chairman of the Federal Reserve

The FOMC is like “no alarms and no surprises”, you can pretty much know what they are going to say and the arguments they are going to put forward before the meeting takes place. 

If you don’t believe just go read my take from last week, this was written before the press conference took place…

• No rate hike this time but maybe next time. Check.

• Need to maintain tight conditions because core inflation is not trending down enough. Check.

• Talking about the time it takes for the Fed’s actions to filter out into the real economy. Check.

Look, we’ve seen how the FOMC operates over the past two years. They aren’t a black box. They are acting perfectly rationally given what they believe about the economy.

I don’t have much post game commentary to add. So let’s limit ourselves to looking at two data points.

The dot plot first. On the chart below you can see the expectation for where the Fed Funds rate will be at the end of each year by the FOMC members.

The red line is where we stand right now. The red square is the median for each period.