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Liquidity Tsunami Cancelled: Inflation Is Slowing Things Down

The most powerful Bitcoin catalyst risks being delayed

Ecoinometrics

Oct 14

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One thing always works to spur a Bitcoin bull market. No, it's not the halving. It's a good old monetary expansion.

Everyone expected this to happen when the Federal Reserve starts cutting rates. This has been anticipated for about a year now.

The problem? The Federal Reserve is hesitating about the pace of those rate cuts. The reason? Inflation.

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Liquidity Tsunami Cancelled: Inflation Is Slowing Things Down

The Takeaway

The Federal Reserve's cautious approach to rate cuts, driven by persistent core inflation, is delaying a potential liquidity boost for Bitcoin. Our Fed Communication Index (FCI) shows hawkish levels despite recent rate cuts, indicating a measured stance on monetary policy.

Core inflation remains stubbornly high, about 50% above pre-COVID levels for both CPI and PCE measures. This "warm" inflation, combined with revised economic data, suggests the Fed may hesitate to inject significant liquidity. Without this catalyst, Bitcoin is likely to remain in a neutral market regime, with limited chances of entering a bullish phase in the near term.