### Bitcoin has been helplessly bearish throughout 2022, with macro economic conditions and monetary policy keeping immense negative downward pricing pressure on bitcoin; and, a backdrop of multiple crypto company crashes also negatively affecting the bitcoin price. But, some new inflation data points to a more bullish macro environment in the horizon.

U.S. December PPI numbers came in at 6.2%, below the expected 6.8% (YoY). Core PPI was 5.5%, which was below the expected 5.7% (YoY). While there are many factors that are presently negatively affecting the bitcoin price, one major element affecting the price is inflation. The effect is indirect though. What has had a direct effect on the price of bitcoin has been the reversal of the US FED’s quantitative easing to quantitative tightening. But, the reason behind the shift was really to bring inflation down so, the root cause of the difficult monetary policy is still inflation. 

PPI is one of two measurements of inflation. The more well-known measure is CPI, which is inflation from the point of view of consumers. PPI gives the point of view of the producers.


PPI is defined as “The Producer Price Index (PPI) program measures the average change over time in the selling prices received by domestic producers for their output.” (US Bureau of Labor Statistics) With the PPI going lower, the US FED’s quantitative tightening appears to be working. This could mean that there would indeed be no need for the US FED to raise interest rates at the same record setting speed as last year (but there are still planned increases). And, this could also mean that the much awaited ‘pivot’ is not too far away. 

However, this data set does not in any way indicate that a pivot would be coming very soon. It is simply a positive sign that inflation is cooling and in this macroeconomic environment, we know lower inflation is good for bitcoin and risk assets. Bloomberg put it this [way](https://www.bloomberg.com/news/articles/2023-01-18/us-producer-price-index-declines-by-most-since-start-of-pandemic): “US Producer Price Index Declines by Most Since Start of The Pandemic.” 

PPI fell 0.5% from a month earlier while core rose 0.1% from a month earlier. Bloomberg pointed out that the good news doesn’t mean the FED’s fight against inflation is over. 

Citing the China re-opening it was warned that the price in commodities may rise. Further, the tight labor market and the resilient consumer demand for services were also cited reasons for inflation to get potentially stuck at rates higher than what the FED is aiming for. Nonetheless, inflation is undoubtedly coming down. The FED may still have a ‘ways to go’, as FED Chairman Powell often reminds the public of, bitcoin and crypto look extremely eager to get a head start on the next bull market. 

Are you ready for the bull market? We actually hope that 2023 will be an accumulation year, for selfish reasons. We really, really want more time for our cost averaging. 

But, if the bull market is here, we won’t complain!

Bitcoin has been helplessly bearish throughout 2022, with macro economic conditions and monetary policy keeping immense negative downward pricing pressure on bitcoin; and, a backdrop of multiple crypto company crashes also negatively affecting the bitcoin price. But, some new inflation data points to a more bullish macro environment in the horizon.

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