Bitcoin bull Cathie Wood says deflation is in the pipeline ahead of today’s U.S. CPI data

GB Market Commentary 13/09/2022

by Marcus Sotiriou

Bitcoin is leaning bullish heading into today’s critical U.S. CPI data from August releasing at 1.30pm, as it attempts to print a higher low on the weekly time frame. Headline inflation is expected to be 8.1% year-over-year, which would be a decrease from last month’s 8.5%. I think if CPI is below 8.2% would be positive for markets, as it shows inflation is it suggests that inflation slowed down considerably from July to August, especially as inflation decreased from 9.1% to 8.5%.

Cathie Wood, CEO of investment management firm Ark Invest, is convinced that August’s inflation will drop convincingly from July due to the following statistics: from post-COVID price peaks, lumber -60%, copper -35%, oil -35%, iron ore -60%, DRAM -46%, corn -17%, Baltic freight rates -79%, gold -17%, and silver -39%.

Cathie said, “used car prices dropped 4% in August (roughly 50% at an annual rate!), have dropped 10% since peaking in January, and if electric vehicles are as disruptive as we believe, could be cut in half, hitting lows last seen during the GFC in late 2008.”

I agree with Cathie in the sense that the decrease in gas, oil and commodities should show up in a substantial drop in headline inflation today.

Core inflation, however, which is the change in the costs of goods and services but does not include those from food and energy, is expected to show an increase from 5.9% year-over-year to 6.1%. If this occurs, coinciding with a drop in headline inflation, then the direction of the market will be very hard to predict as core inflation is a key metric that the Federal Reserve pays attention to.

Fidelity plans to offer Bitcoin trading to its 34 million retail clients, providing further clarity on their belief in Bitcoin’s longevity. This is exactly the type of confirmation that asset managers need to enter into the crypto space themselves. After one domino falls, the rest will come.