Bitcoin on-chain deep dive: BTC falls below the global electrical cost

Fed officials have been prohibited from speaking ahead of next week’s fed funds announcement; investors have been left pondering on U.S. rate cuts priced in for 2023 and 2024. While December 2023 Fed Funds Rate Futures are priced at 4.5%, December 2024 is currently priced at 3.5%; an aggressive rate cut occurred this week.

Jerome Powell and the Fed’s main objective is to control inflation and tighten fiscal conditions; however, since the middle of October, financial conditions have eased as bond yields declined, credit spreads tightened and inverted to multi-decade levels while equities have rallied. The spread between the ten and two-year yield closed to a new wide of -84bps.

Dec. 9 saw worse-than-expected PPI data, with the real test for the treasury market will follow next week’s CPI report. Depending on the CPI results, the Fed funds rate hike could change, which currently sees a 75% probability of a 50bps rate hike taking the fed funds rate to 4.25-4.50%.