Labor Market Remains Strong Despite Sticky Inflation
The August CPI data reinforced the sticky inflation narrative on Wall Street. Multiple measures show 3-month seasonally adjusted annual rates (short-term inflation trends) running above year-over-year figures. This indicates a temporary inflationary pulse that should fade toward roughly 3% over the medium term. We're seeing potential disinflationary offsets from tariff policies, which can coexist with this underlying stickiness as different sectors experience varying price pressures. Labor market signals remain supportive, with jobless claims failing to breach recession-signaling thresholds. This points to a low probability of economic contraction developing in the near term. This fundamental backdrop underpins our view of a durably pro-asset Everything Rally. The rally is driven by continued fiscal and monetary largesse, tax cuts, deregulation, and selective industrial reshoring policies from the Trump Administration. The growth and inflation mix we're seeing creates an environment where real rates remain suppressed and asset prices benefit from policy support.
TLDR: Sticky inflation combined with resilient growth supports Bitcoin as both an inflation hedge and risk asset in an Everything Rally regime.
Easy Money Returns as Fed Begins Rate Cuts
This economic backdrop translates into what markets are pricing as a Goldilocks regime. Global liquidity is trending higher and supporting the current risk-on environment for Bitcoin and stocks. Momentum signals are broadly supportive. We're seeing bearish USD, bullish gold, bearish 2-year and 10-year Treasuries, and bullish equity indices including Bitcoin and Ethereum, while oil remains neutral. Volatility measures across stocks (VIX), bonds (MOVE), and currencies (CVIX) all remain subdued. This typically creates favorable conditions for risk-taking across asset classes. Next Wednesday's Fed meeting should deliver our base case 25 basis point cut with roughly 96% probability versus just 4% odds for a 50 basis point move. This reflects the central bank's increasingly data-dependent approach.
Looking ahead, Fed Chairman Jerome Powell will likely be replaced next year with a dovish chairman supportive of President Trump's economic philosophy. Trump's real estate background shows in his economic approach - developers routinely use high leverage to acquire appreciating assets, focusing on cash flow coverage rather than absolute debt levels. Applied to the country, this means aggressive fiscal spending and monetary accommodation to drive nominal GDP growth faster than debt accumulation, effectively "growing into" our debt burden just like a real estate portfolio. This strategy of prioritizing growth over fiscal restraint creates a perfect storm for Bitcoin: sustained currency debasement fears from money printing, persistently low real rates that punish cash holders, and a risk-on environment that rewards scarce, hard assets over traditional safe havens.
TLDR: Goldilocks regime, rising global liquidity, bullish momentum, and dovish Fed policy create an optimal macro environment for Bitcoin's continued outperformance.
Keep reading with a 7-day free trial
Subscribe to Netizen Research | Bitcoin, Macro & Markets to keep reading this post and get 7 days of free access to the full post archives.