There was a bit of a rally in stock markets today, but this was a relief rally after taking a beating throughout the week. All eyes were on Federal Reserve Chairman Jerome Powell as he took the stage on Wednesday to announce the decisions made at the most recent FOMC meeting.

The market reacted negatively to another 0.25% cut from the Federal Reserve that many considered a "hawkish cut" due to the fact that Chairman Powell articulated that it is likely that there will be less rate cuts in 2025 than were previously expected. This is likely driven by the fact that inflation, as reported by the terribly inaccurate CPI, has been coming in higher than expectations. Signaling that the Fed does not, in fact, have inflation under control. Who could have seen that coming?

Here's how the US 10Y Treasury yield reacted to the announcement:

"Not great Bob!" The US 10Y Treasury yield is something that everyone should be paying attention to over the course of the next year. Since the Fed started cutting rates in September of this year, the 10Y yield has been acting anomalously compared to how it has acted historically after Fed interest rate decisions. Since September, the market has been calling the Fed's bluff on inflation and rates have been moving in the opposite direction compared to what would be expected if the Fed had things under control. The "hawkish cut" made on Wednesday is not a great sign. The Fed is being forced to recognize that it cut "too much too fast" before actually getting inflation under control.

One has to wonder why they made such aggressive moves in September. Why the need for a much more dovish stance as quickly as they moved? Do they see something behind the scenes of the banking system that makes them believe that another liquidity crisis was on the horizon and they needed to act to prevent yet another banking crisis? Now that it is clear that inflation isn't under control and if there really was a liquidity crisis on the horizon, what are the first two quarters of 2025 going to look like? Could we find ourselves in a situation where inflation is beginning to accelerate again, there is a liquidity crisis, and the Fed is forced to rush back ZIRP and QE only to further exacerbate inflation? Couple this potential scenario with the proposed economic policy from the incoming Trump administration and it isn't hard to see that we could be in for a period of economic pain.

One can only hope that the Fed and the incoming administration have the intestinal fortitude to let the market correct appropriately, reprice, clear out the bad assets and credit that exists in the system and let the cleanse happen relatively unperturbed. That has what has been desperately needed since 2008, arguably longer.

On that note, bitcoin is going through a bull market correction this week as well. Likely incited and/or exacerbated by the turmoil in traditional markets.

Many are proclaiming that the end of this bull market is here. Don't listen to those who have been hate tweeting bitcoin all the way up this year. They've been looking for a correction to bask in schadenfreude and confirm their biases. These types of corrections are to be expected when bitcoin runs by checks notes 100% over the course of less than three months. We're approaching the end of the year, which means that people are selling to prepare for taxes (which may be happening in the stock market as well). Add to this fact that long-term holders of bitcoin have taken the most profit they have since 2018 and it probably explains the recent pull back. Can't blame the long-term holders for seeing six-figure bitcoin and deciding to bolster their cash balances.

I couldn't be more bullish on bitcoin than I am right now. The fundamentals surrounding the market couldn't be more perfect. Despite what the Trump administration may have in store for us in terms of economic policy (I agree with most of the policies he has presented), I find it hard to believe that even he and the talented team of people he has surrounded himself with can overcome the momentum of the problems that have been building up in the system for the last 16-years.

The "find safety in sats" trade is going mainstream as the market becomes more familiar with bitcoin, its properties, and the fact that it is very unlikely that it is going to die. The fervor around bitcoin as a strategic reserve asset for nation states is only picking up. And if it catches on, we will enter territory for bitcoin that was considered utterly insane only a year ago.

On that note, Nic Carter made some buzz today with a piece he wrote for Bitcoin Magazine explaining why he believes a strategic bitcoin reserve is a bad idea for the US government.

https://bitcoinmagazine.com/politics/i-dont-support-a-strategic-bitcoin-reserve-and-neither-should-you

While I agree that the signal the US government could send by acquiring a bitcoin strategic reserve could be bad for the US treasuries market, I think it comes down to strategy. The Trump administration will have to think strategically about how they acquire their Strategic Bitcoin Reserve. If they ape in, it could send the wrong message and cause everyone to dump their treasuries, which are the most popular form of collateral in the global financial system. However, there are ways to acquire bitcoin slowly but surely from here into the future that ensure that the United States gets proper exposure to the asset to protect itself from the out-of-control debt problem while also providing itself with a way out of the problem. Many of these potential strategies were discussed in two recent episodes I recorded. One with Matthew Pines from the Bitcoin Policy Institute and another with Matthew Mežinskis from Porkopolis Economics. I highly recommend you all check those out (linked below).

Final thought...

I am the most locked in from a focus perspective while on flights. Even with two kids under 5.

Merry Christmas, Freaks!