This Week's Top Headlines

i) Bitcoin Bulls Reunite. The world's largest cryptocurrency jumps to a 10 week high of $21,400, erasing post FTX losses.

ii) US CPI cools to 6.5%, meeting overall expectations and marking the 6 straight month of yearly declines. Markets rallied in response, while the dollar slumped.

iii) A summary on something you might have missed: our most recent Twitter space session on "Personal Finance" with Blogger Marcus Keong and Economist Sani Hamid.

Scroll down to read the details.

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Bitcoin Breaks Past $21,000, Shattering Market Serenity

Bitcoin has seen a significant surge in value over the past few days, with the price miraculously breaking past $21,000, a level not seen since before the FTX crisis in early November. The bulls were anticipating a rally, but no one expected such a strong and sudden recovery (at least I didn't). 

The broader crypto market has also shown similar signs of life, as the total market cap increased from $813 billion on Thursday to $933 billion at the time of writing - an impressive 14% rally.

The reason why I said no one expected this rally is because we've never seen 13 green candles in a row since March last year. 

I mean, to see even a thick green candle itself these days is already a sight to behold.

The Crypto Market Sentiment Shifts and Recovers to Near Neutral Levels

Throughout the second half of 2022, Bitcoin has spent most of its time in fear, obviously due to the countless crises we've faced. But the sharp jump in Bitcoin's price recently has reinvigorated investors. The sentiment swung hard right to 46 points, close to neutral.

People are Beginning to Call Bottoms.

Plan B, an anonymous entity famous for creating the "Stock to Flow" model for Bitcoin, expressed his thoughts on the recent price action. He believes that the absolute bottom was $15,500 in November.

I remain skeptical on Plan B's predictions. Mind you, this was the very same guy that said Bitcoin will hit $100,000 by the end of December 2021.

US CPI Falls to 6.5%, the Lowest in more than a Year

Inflation is now at a 13-month low, with the most recent figure coming in at 6.5% on Thursday (Jan 12). The reading represented a 0.6% decrease from the previous month at 7.1%. It also marks the sixth straight month of yearly declines. Meanwhile, core inflation showed a similar trend and fell to 5.7%.

Both the overall and core inflation were in line with expectations.

Oxford Economics said the latest figure was "another small step in the right direction," but then explained that it was unlikely to deter the Federal Reserve from continuing to raise rates as it fights inflation.

Markets were already rallying before the CPI data was released, in anticipation that the reading would bring good news. The announcement only helped Bitcoin and the US stock market to rally further.

• The US stock market gained 2% over Thursday and Friday.

• Bitcoin gained 20% in 4 days.

• The US Dollar fell by 1% - the lowest level since June last year.

Traders who were Shorting Bitcoin got Rekt in a Massive Short Squeeze

A short squeeze is a sudden bump up in price caused by a series of liquidations on short positions. It occurs when there are a large number of short sellers betting on the market to fall. A slight increase in price builds up momentum and triggers a chain reaction as overleveraged short traders cut their losses and exit their positions by buying back the asset. The result is an almost unrealistic rally (like what we've seen for Bitcoin).

Over $800 million of short positions were liquidated when Bitcoin flipped upwards.

Investors are now 93.7% certain for a 25 bps hike during the next FOMC meeting

In my previous issue, we analyzed the target rate probabilities for the Fed during its next meeting on Feb 1. They were at 76.6% for a 25 bps hike and 23.4% for a 50 bps hike.

The latest inflation data gave more evidence that rising prices are cooling, which encouraged investors to look at a less aggressive Fed.

The Fed on the other hand, has made it clear that while rates rises may slow as inflation declines, the peak interest rate will remain high until inflation is brought down to the central bank's target goal of 2%.

With that in mind, I believe that Bitcoin's rally could last until the next FOMC meeting. Beyond which, it will entirely depend on Chairman J. Powell's speech and the size of the rate hike. It's still too early to call this the start of a bull market.

Personal Finance with Marcus Keong and Sani Hamid

On Monday (9 Jan), we conducted a special session with Financial Content Creator Marcus Keong and Economist Sani Hamid. The session stretched close to 2 hours, and we covered a lot on managing money. The topics include:

• What’s the first, most important lesson about money that one must know about?

• Is setting financial goals important? How do we set goals that are realistic and achievable?

• How do I save money in the current era of inflation?

If you missed the session, be sure to listen to the full recording on our Spotify. Here's the summary of our session:

That’s all for this week’s newsletter!

Disclaimer: I am not a financial advisor. This newsletter is based on my own analysis and research. Do not take any of it as financial advice.

*This newsletter was written at 10.30 AM on 15th January 2023 and completed at 3.30 PM the same day. To get early access to our newsletter, be our patron for as little as $1/month!