Hi guys, welcome back to The Crypto Fire…

Let us be honest with each other for a minute.

Last week felt a bit like checking the weather forecast for a beach trip and seeing a hurricane warning instead.

We witnessed a brutal chain of sell offs that dragged prices down from Tuesday straight through Thursday. It was ugly and it hurt the portfolio.

But here is the silver lining. Since then the bleeding appears to have stopped. The charts have stabilized and we are all looking around wondering if it is finally safe to step back into the water.

So the big question on everyone’s mind is where do we go from here?

To figure that out we need to look at the calendar because this week is packed with events that are absolutely going to move the markets.

The boring macro stuff usually matters the most for your bags. This week we have a laundry list of data drops that the Federal Reserve watches like a hawk.

On Monday we get to see the December Retail Sales data which tells us how the holiday shopping season actually went.

By Wednesday we will see the January Jobs Report followed by Thursday which brings us the Initial Jobless Claims and Existing Home Sales data.

But the main event is happening on Friday. That is when we get the January CPI Inflation data.

Why should you care?

Because right now there is a massive difference between what the government says inflation is and what the real time data shows. The last print from the Fed showed inflation sitting at 2.7 percent.

However independent trackers like Truflation show real time inflation is actually sitting way lower at just 0.68 percent.

Something has to give here. If the government number on Friday drops closer to the real time number the chances of future interest rate cuts go way up.

And as we all know crypto absolutely loves rate cuts because cheap money fuels risk assets.

You might want to grab some popcorn because we have a massive week for company earnings. It is not a long list but the names on it carry a ton of weight for our industry.

On Tuesday after the market closes Robinhood will report their numbers. The ticker to watch there is $HOOD ( ▲ 4.52% ).

Then on Thursday the giant Coinbase will step up to the microphone with their results for ticker $COIN ( ▲ 1.29% ).

We will be watching these closely. When these companies do well it usually signals that retail traders are coming back and that the industry is healthy.

Tuesday is especially important for another reason aside from Robinhood. It is the day we might see the political machine start moving regarding crypto laws.

If you have been waiting for institutional money to flood into crypto you are waiting for regulations like the CLARITY Act to pass.

This legislation would open the doors for the big players in the United States to enter the market safely.

We might get a fresh catalyst this week. On Tuesday staff at the White House are meeting to discuss a specific bottleneck in the bill regarding stablecoin yields.

This has been a major sticking point that has slowed everything down.

If they can clear this hurdle it removes a lot of the brush from the path ahead.

However do not pop the champagne just yet. Even if this meeting goes well the road to passing a full law is still long.

But any forward momentum here is a bullish sign for the long term health of the market.

Here is a secret that Wall Street veterans whisper about but rarely say on television.

We are in an election year cycle.

Why does that matter for your crypto bags?

Because no politician wants a market crash on their resume right before voters head to the polls.

History shows us that governments tend to loosen the purse strings when reelection is on the line.

Even if the Fed talks tough about interest rates the Treasury has other ways to inject liquidity into the system to keep asset prices floating.

This creates a hidden floor for risk assets like Bitcoin $BTC ( ▼ 2.12% ). While the charts look scary right now remember that the political incentives are aligned with number go up.

They might not say it out loud but the money printer is usually warming up backstage during campaign season.

Most people stare at the price charts all day and panic when they see red. But smart investors look under the hood.

There is a massive disconnect right now between the price of crypto assets and the actual usage of the networks.

While prices took a nosedive last week the fundamental activity on blockchains is hitting all time highs.

We are seeing record breaking numbers for stablecoin transaction volume and active addresses on Layer 2 networks.

The engine of the crypto economy is running hotter than ever even if the paint job looks a bit scratched right now.

When usage goes up and price goes down it usually creates a coiled spring effect. Eventually the price has to catch up to the reality of the adoption.

The general vibe right now is cautious optimism. The market has taken a beating but the fundamentals of the projects we love have not changed.

Whether you are listening to macro veterans or crypto native fund managers the advice is the same.

Watch the data ignore the noise and pay attention to how the traditional finance world reacts to the inflation numbers on Friday.

Mark those calendars light some incense and pray to the crypto gods for some green candles.

⚠️ Disclaimer: This newsletter is for informational purposes only, just for fun and knowledge. This is not investment advice. Your money, your responsibility!