Before I start, let me share some exciting news with you. You may have heard about the GeckoCon conference hosted by CoinGecko, our most-used crypto prices provider. We have some VIP tickets to that event, and we want to give them to you!

If you want to get a ticket, reply to this email and our support team will process your request. I’d be happy if you attended. Christian and I from Crypto Briefing Editorial moderated a couple of panels. Alright, back to the Digest.

In my opinion, the most important news this week was the 6.2% jump of the Consumer Price Index (CPI) in October. For those uninitiated—CPI is synonymous with inflation.

With billions of dollars injected into the economy, there’s no surprise that inflation is growing. The Fed tries to convince people that it’s temporary, or as they call it, “transitory,” but people are worried that this may not be the case.

Higher inflation means that the cash in your pocket gets devalued quicker, and thus the first instinct is to convert it to assets like stocks to protect your wealth. However, when the news about the inflation spike was published, the stock market dipped.

ETH burning stats. Source: Watch the Burn.

Experienced market participants likely weren’t surprised. When inflation goes up fast, it’s natural to expect the government to slow it down by raising the rates.

Higher rates mean more expensive credit and less money flowing into the capital market. Hence, people expect that there will be less buying power for risk assets. But what does it mean for Bitcoin and crypto?

Bitcoin’s core value proposition is the store of value, which is why it’s commonly called “digital gold.” Although there’s data that shows that BTC isn’t inversely correlated with the stock market like gold, many people believe that it’s a good investment during inflation.

However, if you look at the price action of gold and BTC when the inflation news started to spread, you can see that while BTC followed the stock market, gold didn’t.

Philadelphia Gold and Silver Index (blue) vs. BTC (gold). Sources: Coingecko and Investing.com.

In my opinion, this situation shows us that if the Fed is going to raise rates due to increasing inflation, BTC and crypto won’t perform well. However, S&P 500 historical performance suggests that the pullback may not last too long.

The market’s reaction to the Fed dealing with inflation in 2013. It was short-lived. Source: Fisher Investments.

Moreover, even if the Fed raised the rates today (the current plan is to start doing it in 2022 or later), inflation would manifest itself for months to come. The cat is out of the bag, and assets will likely increase in a short-to-mid timeframe.

Wrapping this up, while I don’t believe that BTC is a good hedge against inflation, I still think the outlook for capital market and crypto is positive. Let the party go on.

SIMETRI Portfolio–Comfy

BTC continues to move sideways, which gives some of our Picks time to shine. Still, we aren’t yet in the phase of exuberance, during which we will start closing many of the older positions.

For now, I’m comfy with the SIMETRI Portfolio.