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BTC, MACRO & OTHER BAD NEWS - UPDATE 01/2

Kevin Warsh sang the ball: the Fed wants to regain flexibility in monetary policy.

Warsh criticized excessive forward guidance. When the Fed spends too much time telling the market what it intends to do, it creates the mirror-hall problem—the Fed reacts to the market while the market reacts to the Fed.

The idea is fewer promises about the future and more reaction to data. And the data still isn’t exactly comforting.

The U.S. economy remains resilient; the labor market is close to full employment, and investments are still strong. At the same time, PCE is at 3.7%, well above the 2% target.

Warsh made it clear that price stability remains the Fed’s central responsibility and that interest rates should remain the main tool of monetary policy.

AI is also on the radar.

The Fed has already created a task force to assess how productivity gains driven by artificial intelligence could change growth, employment, and, consequently, the very conduct of monetary policy.

OK, BUT SO WHAT?

The market may continue to expect rate cuts, but Warsh’s message puts a brake on that certainty.

If inflation continues to run above target and the economy continues to be relatively strong, there is less room for the Fed to simply deliver the cuts the market would like to price in.

And for Bitcoin, the liquidity environment depends not only on how much the Fed cuts, but also on why it is cutting. If it cuts because of economic slowdown is the story, with inflation still pressing, the problem is the o-to-dô.

And the Fed seems increasingly interested in making it clear that it doesn’t want to be a hostage to the market’s expectations.

Less forward guidance. More data. More uncertainty.

Welcome to Uncle Jackson’s Pit.

The ZCSH launched yesterday #Grayscale and everyone is watching the volume… but they’re looking at the wrong number.

The Zcash ETF (ZCSH) began trading on the NYSE Arca on 25/08 and traded about US$ 14.8 million on its first day.

BUT LET’S GO, LITTLE CRYSTALS OF PROACTIVITY:

Volume ≠ inflow.

Those ~US$ 304.6 million in AUM are also not new money coming in.

ZCSH was created from the conversion of the old Grayscale Zcash Trust; the assets already existed before it became an ETF. At launch, the fund had roughly this here:

• US$ 304.6M in AUM
• 387,849 ZEC
• 4.83M shares
• US$ 14.8M in volume on Day 1

Now, what really matters going forward:

• Net inflows/outflows (how much new money is entering or leaving)
• Shares outstanding (if the number of shares increases, it signals new shares being created)
• ZEC holdings (if the fund is truly accumulating or redeeming ZEC)
• AUM + ZEC price (you have to look at both together)
• NAV and premium/discount

Simple summary:
Volume = movement in the market.
Inflow = new capital entering the product.
These are completely different things.

Yesterday’s US$ 14.8 million were interesting, but the next few days will tell the real story.

If shares and holdings of #ZEC start growing along with AUM, then we’ll have clear evidence of real institutional demand. And that’s when the game of #zcash
moves to yet another level.

Are you following
#ZCSH closely, or $ZEC closely? Let’s debate together
👇

BTC, MACRO & OTHER DISASTERS
TODAY’S EPISODE: PCE

Today’s data only confirms this: the US economy is slowing down, but inflation is still far from allowing the Fed to cut rates and fix everything. PCE at 3.7% year over year. Core at 3.3%. In the quarter, core accelerated to 3.6% (above the expected 3.4%). GDP revised to a meager 1.5%. GDP price index at 6.4%.

I.E.:

weaker growth + inflation still pressuring things. This is exactly where Treasuries come into play. The market is trying to balance three things at the same time:

• the economy losing momentum
• inflation above target
• the government financing massive deficits

It doesn’t matter that the Fed wants to cut rates.
Long yields depend on inflation expectations, debt supply, and the investors’ risk premium.
Consumers are also slowing down: income +0.4%, spending only +0.2%. Durable goods +1.1% (excluding transport, only +0.4%).

I.E.:

inflation hasn’t disappeared, but demand isn’t soaring anymore.
And together with what was already on the radar:

• elevated oil
• the Hormuz shock
• Treasuries under pressure
• higher funding costs
• deterioration in private credit
• increasing intervention from the Treasury

The story becomes much more interesting than just staring at the Fed’s rate-cut calendar. In the short term, Bitcoin is still being held back by persistent inflation + high yields.
But if growth worsens and authorities need to increase liquidity while the debt market demands more intervention, the conversation changes: can the system finance its own debt without causing a financial contraction?

That’s why, at this moment, my focus continues to be on:

• Treasuries
• Liquidity
• Financial conditions

More than in any single isolated Fed decision.

The big question of the cycle remains: how much stimulus the system will need before absorbing everything without reigniting inflation.

GM FRENZ!

Bitcoin featured in Pokémon: PONYTA