Bears seize momentum

Inflation is spiking. At 8:30 a.m. (EST) today, the U.S. Bureau of Labor Statistics released November Consumer Price Index (CPI) data showing a 6.8% increase versus one year ago at this time, worse than expected and the highest CPI surge in nearly 40 years.

Within minutes, the 10-year U.S. treasury yield ticked higher, not unexpectedly, considering the likelihood that interest rates are set to jump; stock futures also went higher, counter to the narrative that the market is spooked by higher consumer goods prices.

Bitcoin, as of 8:45 a.m. (EST), was $48,440. We looked again at 9 a.m., just before signing off. BTC was above $49,000.

Inflation hedge drumbeats were loud enough (while coinciding with a record BTC price surge) in early November to bolster the argument that crypto’s Big Poppa warranted a $70K handle and then some. But somewhere along the way, market participants came to realize perhaps BTC is more of a risk asset, hardened by the lessons of Covid-bred stock market drawdowns and their spill-over to crypto in recent weeks.

On a day when crypto appeared to be on the verge of becoming bear market chew toys, there is Quant (QNT) having the colossal gall to climb 9% higher. An interoperability-focused protocol, QNT had a huge August, notched a record high in September but steadily fell from there. It's now about $170, down 60% from its high.

Pretty much everything is down today. Bitcoin blew off $50,000 and ran into the arms of $48,500, a hasty jilting coinciding with macro talk turning to the strengthening U.S. dollar, a byproduct of inflation and tighter monetary policy. Bitcoin, like gold, is inversely correlated to the dollar, so a stronger greenback has seemingly brought downside pressure to BTC prices (CoinDesk).

As of 9 a.m. (EST), BTC (although drifting higher relative to one hour earlier) was still below $50K, having declined 14% over the past week. Ethereum fell 2% over the past day, to around $4,200.

Most of crypto is bright red, a pomegranate pulp splatter spanning multiple days and weeks. For instance, Shiba Inu (SHIB) fell 4% overnight and is down 35% over the past month. It's still the 13th-largest coin. No. 12 Avalanche, which like SHIB briefly burst into the Big Ten before begging off, has lost 25% over the past two weeks, although AVAX's rolling monthly performance is flat.

To: North Pole

Re: BTC

Dear Santa Claus:

Hope all is well. We want for nothing, save for peace on earth. And, if possible, we’d like to see Bitcoin bulls step up.

Indeed, they'd need to push the price closer to its moving average, around $50K, lest the bears take hold and BTC visits $45K. Which is a more likely scenario (AMBCrypto).

Looking ahead to next year, Bloomberg's senior commodity strategist Mike McGlone tweeted, "BTC $100,000?"

"Peaking commodities and the declining yield on the Treasury long bond point to risks of reviving deflationary forces," boding well for BTC in 2022, McGlone asserts.

It's a view that assumes BTC and gold share a kindred underlying reason for being.

Meanwhile, Ripple co-founder Chris Larsen, taking an even longer view, has unveiled his plan for miners to move away from a proof-of-work (PoW) consensus algorithm, one that begets computational brute force on a mass scale, increasingly viewed as an unsustainable display of energy gluttony, putting the largest crypto at risk of being at best an outlier and, at worst, a societal pariah.

Larsen suggests that the “least disruptive” solution to BTC’s energy problem is to change block sizes and “take a snapshot of the current hash rate of existing miners;” and then reward miners on a pro-rata hash power basis. Changing the block size, Cointelegraph said, would almost certainly lead to a PoW fork.