Bitcoin Deep Dive #63
The Economy Won't Slow Down
The Growth Shock Never Arrived
Last week the market was testing the new Fed, and this week the economy passed the test. Investors spent months waiting for policy shocks, energy shocks, and higher rates to break growth, and instead growth absorbed them. Three fears opened the week, and each faded by Friday. On energy, Iranian state television disclosed an unofficial memorandum pointing toward de-escalation in the Strait of Hormuz, and Brent crude has since fallen to roughly $87 per barrel (from a high of $117 in April). On inflation, April Core PCE rose 0.27% on the month and lifted the annual rate to 3.3%, firm but short of the reacceleration many had feared. On growth, the savings rate fell to its lowest since June 2022 and real income growth was the weakest since March 2022, yet consumer spending still held above trend. The shock simply never arrived.
What This Means For Bitcoin: Bitcoin tends to benefit when inflation cools without growth breaking, and that is precisely the backdrop this week produced.
The New Fed Reaction Function
Beneath the headlines, something structural is shifting in how policy responds to a strong economy. For years the question was whether inflation would return. Now the real question is how much inflation a Kevin Warsh Fed will tolerate while growth stays strong, and that is a fundamentally different regime than the one investors grew used to. The prior Fed under Jerome Powell leaned against inflation almost reflexively, while a Fed that takes the productivity boom seriously can look through firmer prices as long as labor stays healthy and output keeps expanding. The AI capital spending cycle continues to support that view, with the four largest US technology companies on track to spend roughly $700 billion on capital projects this year, up from about $410 billion last year. At the same time, the plumbing connecting Bitcoin to traditional markets keeps widening, as the SEC approved Nasdaq-listed Bitcoin index options.
What This Means For Bitcoin: A world of stronger nominal growth, a more permissive Fed, and widening institutional access stays constructive for Bitcoin over longer horizons.
Reflation Still Leads
The cleanest way to read the cross-asset tape is through a single tension. The top-down market regime continues to behave like reflation, the risk-on environment in which growth is seen as accelerating and policymakers are unlikely to stand in its way. The bottom-up economic regime still points the other direction, toward deflation, with both real growth and core inflation expected to soften over the medium term. That divide is the most important signal on the board. The volatility-adjusted momentum signals confirm it, as the S&P 500, the Nasdaq, global equities, oil, agriculture, and industrial commodities all carry bullish momentum while Bitcoin, Ethereum, and now gold sit on bearish momentum after gold’s downgrade this week. Volatility is falling across asset classes, liquidity is trending higher, and near-term crash risk remains low. The market is delivering two verdicts, and for now reflation is winning.
What This Means For Bitcoin: Bitcoin remains one of the few major assets not participating in a macro backdrop that otherwise rewards taking risk.
The following section is exclusive to Premium subscribers and includes our Dynamic DCA recommendation based on Bitcoin’s on-chain metrics.
PSA: I’m away this week so the next Bitcoin Deep Dive will be Monday June 15. Thank you for your support!
