What hotter-than-expected inflation means for crypto

CPI came in hot today and the problem wasn't just gasoline. Of course, that means markets are under pressure because it means that the Fed may likely hike rates. I'm old enough to remember when last week people were talking about the Fed cutting rates. Markets are all over the place. The readings and the data are all over the place. We're going to unpack some of it right now on the Daily Wolf. Let's go. What is up everybody? Welcome to the Daily Wolf on Yahoo Finance. I am your host Scott Melker, also known as the Wolf of All Streets. Now, I know that every single one of you watching every one of these shows, also watches my 9:00 a.m. show on YouTube. But today was extra special. I had the opportunity to interview Seedina Moose, the author of the Bitcoin Standard. That book was one of the reasons that I became a Bitcoiner. Highly recommend that you read both that and the fiat standard and also listen to the interview that I had with Safe Aden this morning. Now that I've done that commercial for my other content, let's dive in to the actual news of the day. And let's start with CPI, baby. US September CPI comes in hot, sending Bitcoin sharply lower. Okay, so here's what happened. Break it down. Bureau of Labor Statistics September headline CPI rose 6% month overmonth and 3.7% year-over-year. Core CPI rose.3% monthly and 2.6% annually. Now what matters for markets? Bear with me. Expectations were 6% monthly, 3.6 annually for headline and 2% monthly. So everything came in hot versus expectations. Now gasoline rose 9.1% which accounted for more than half the monthly headline increase but shelter, used vehicles, apparel and transportation services also increased. Okay, let's begin to start to maybe kind of try to attempt to think about potentially unpacking this because I'm going to be honest up front. Nobody can. First, let's talk about the absurdity of market reactions. Markets do not react to how inflation is behaving in a vacuum. We know that the target is 2% and we are absolutely nowhere close to 2%. So what markets are reacting to is how the numbers which are calculated differently uh almost every time but we can get into that another time but how the numbers do versus the expectations and how are those expectations set you ask I don't know arbitrarily by pundits who have an idea of what they think that it might be so just to summarize markets react to how an arbitrary number based on data that's calculated differently over time reacts to an arbitrary target having nothing to do with how good or bad the number actually is verse the target. Any of that make sense to you? Good. Me either. And it's not just CPI. We talked about last week how PCE inflation actually came in soft and job numbers of course also came in soft and unemployment which meant that the Fed didn't need to hike anymore. They could cut. Well, now these hot inflation numbers mean that the Fed is more likely to hike and not to cut. And apparently a hike is bad for markets. You get it? Let's take a look really quick. Fed decision in October 2026. Fed maintains rate 63% hike 25 bips, 38%. I believe that was at 15% a day or two ago last I checked. So now the market is pricing in tightening conditions and another rate hike which means of course that your beloved assets will go down. Good news is bad news. Bad news is good news. I just want you all to be cognizant of how utterly nonsensical this really is. Right? Everybody feels it. Everybody knows that inflation is bad. Right? The cost of the things that you buy has gone up and it continues to go up. Right. Does it matter to you whether CPI, PPE, PCE, OP, yeah, you know me. Does it really matter to you if those are two or 2.5 or 3.4 or 3.1 or what the data inputs are? Or does it matter to you that your stake costs more today than it did a month ago? That your gas costs more today than it did a month ago. I would venture that most people care how they feel when they go to the store more than they care what they read when they go on to their non-existent Bloomberg terminal cuz those things are really really expensive. But when you read the headlines, so yes, in the very short term, Bitcoin may move down with the rest of the markets which are obviously all dumping uh today on this news. But what's more important is the very phenomenon behind it. the idea of the nonsense, the fact that we know that eventually the government is going to have to be irresponsible and print more money, the fact that we know that the Treasury is intervening in the Bob market because there's too much pain. That is the actual long-term case for Bitcoin. So, yes, I have to show up at noon every day and tell you what Bitcoin's done because of some stupid fabricated headline or number, but the reality is all of these fabricated news headlines and numbers are actually the reason that you should buy and hold Bitcoin in the long term. Man, it's crazy. Every week, every week, I'm old enough to remember last week when we were talking about the cooked numbers that meant that they could cut rates. Now we get to talk about the slightly cooked numbers that are probably not as bad as they seem that could make them continue to raise rates. It's a good time out there in uh in finance land. I'm really glad that I'm not Kevin Walsh. Although I'm not really glad that I lack Kevin Worsh's hair cuz it's amazing and I'm jealous. Okay, on to the next story which is not about uh the irresponsibility of our government. It is this Kraken parent to become first crypto firm to buy a EU bank as it expands into deposits. Payward agreed, it hasn't happened yet, to buy Lithuania's Salo Bank, which I know you've all heard of, which holds $190 million in total assets, securing an EU license for depart deposits and lending. Okay, this is really, really important, even though it may not sound immediately important to you. So, I've long covered all of the crypto exchanges and their activities in Europe, especially in context of Mika and the new regulatory regime, right? You've heard the stories about how Binance thought that they had a license from Greece, but at the last minute they were rugpulled by Christine Lagard herself and unable to get a license. That's about how crypto exchanges can operate in the in the European Union. This is different. This is a crypto exchange buying a bank so that they can participate in the full suite of banking service including deposits and lending. Right. In the United States, there's been much to do about nothing when crypto companies get a trust charter from the OC, meaning that they can do some banking service, but not the key banking services that any of you think about like going into a bank and depositing your money and getting a mortgage and lending and them lending your money and fractional reserve banking. That is what is happening here. So, this would probably close in 2027. It's not happening immediately, but this combines crypto services with traditional banking capabilities, including depositing and lending in the European Union, powered not by the banking side, but by the crypto side. So, this is a complete change in my mind of the competitive landscape, right? You have a crypto exchange that wants to become a broader financial firm, trading, payments, borrowing, saving. Obviously, for customers, the appeal is that you have a one-stop shop for all of your banking and crypto needs. And for Kraken, well, they can kill crypto exchanges and banks. Their competition on both sides. I mean, we spent years trying to escape escape the banks. Apparently, the next step is to buy one. Yes, I think that this is uh big news. it probably will go through and we're going to see a lot more announcements like this both in the European Union and you would have to imagine we will also see it beyond because once this precedent is set there is probably no going back. Now on to your favorite topic which is obviously Bitcoin treasury companies. We have this right here. ASST stock rises overnight. That's not really the story. This is the story. Strive launches IPO of 15% SATs preferred stock to fund Bitcoin purchases. And if I turn on this handsome guy, you can see me talk next to me. Didn't know I was going to be in that article, but feels like an opportunity to show you myself twice like Michael Keaton. Was that the movie? Duplicity. What was that? Multiplicity. Bunch of me running around. Clones everywhere. Nobody wants that. Literally nobody. Especially my wife. Nightmare. So this is a huge announcement from Strive. They're launching the IPO of 15% SATS. They have their project product SATA which is competition to STRC from strategy who also has Strive and Stride and Strike and Stra and Stra and Stru STD and STRP and all the other things that you might have gotten in college. Um so this is different. They're raising $500 million. is going to have a 15% annual cumulative dividend at a fixed rate unlike the I believe it's 12% or third the variable rate that comes with the preferred like STRC and SATA they can use this to buy Bitcoin uh income producing assets acquisitions and share repurchases now when they establish this at sell it they're going to immediately establish an 18-month dividend reserve using existing cash and securities Scheduled payments would occur each business day beginning November 9th subject to declaration and legally available funds. Importantly, SATS would rank junior to existing preferred stock. SATA SATS has a fixed dividend rate. SATA has a variable dividend rate. So basically, they're unlocking a new audience that does not want to be subject to the variable rate by offering a fixed rate product, but it's a 15% paid daily, I believe. Absolutely incredible. And at the same time that we're seeing votes from strategy to make STRD and STR ABC, the EFG, HI, JK, LM, OP, and STRC all daily paid dividends as well. There's a lot going on in the treasury world. They're finding a lot of novel ways to buy Bitcoin and bring in new investors. Something that's not bringing in uh new investors is fear of quantum. Coinbase outlines ways to protect to protect from quantum attacks. So on October 13th, that is yesterday, Coinbase released a technical post that said preparation should start before a quantum threat becomes certain because network changes and wallet migrations can take years. So Coinbase said they custody approximately 5% of all Bitcoin for their customers. Obviously, you know that they custody most of the ETFs. So they have a pretty significant say in this market. The discussion in this paper includes flexible strategy uh security designs and staged migration. They ask the difficult questions what to do about abandoned or inaccessible coins like Satoshi's wallets and that that discussion should proceed while we do the technical work. So the real story here is that they're saying that quantum is going to be an issue. We don't know how big and now is the time to get prepared. They're basically preparing to change locks before a m future machine can come in and pick them. But what I find interesting here in the whole quantum debate is that Bitcoin's hardest upgrade may actually be get getting everyone to agree that it needs an upgrade. Right? You have a lot of people who say the quantum threat is nonsense. What are we doing here? What are we even talking about? And then there are a lot of people who think that you should sell your Bitcoin right now because quantum is going to destroy it. I tend to think that it's sensible to do exactly what Coinbase is, which is prepare for the worst and ex and and hope for the best. And that's what they're saying here. Get ready for it. It may be an issue. If it is, we will be prepared. Next story. Ripple news. Pervy partners with Ripple for its XRP ledger wallets. What does that mean? Ripple is making XRP ledger wallets easier to build into apps. This is a partnership with Stripe owned Privy, which means users could send XRP or Ripple Ripple's dollar stable coin RLUSD without setting up a separate crypto wallet at all. It also lets AI agents hold funds and automatically pay for services. Obviously, this matters because it's once again fewer steps to use crypto payments. Right now, this is not a big use case on Ripple and RLUSD. It's about 7,000 XRP and 12,750 RLUSD combined. It's activity, but not evidence of massive money moving, but they are preparing to abstract away the complexity of crypto so people can use their things. And we finally have a very quick how not to invest. Hit it. >> How to invest. >> How not to invest. >> Here it is. Crypto exchange M&X, which you've never heard of, takes on OKX Bitget, offering preIPO futures for AI giants. Here's how to how not to invest. If you are trading preIPO futures and believe that you somehow have bought stock in anthropic or chat GBT or something else that's not on the market, you are dumb and you are going to lose your ass. This is people betting on leverage on the price of what it could be in the future on an exchange that probably is not as safe as the bigger names that you've heard of. Nothing against M&X. I literally have no idea who they are. But I think at this point with the established places that you can trade preo if you actually choose to, probably not the place that you're going to do it. CPI, PPI, PCE, OP, you know me. Don't be distracted by any of it. It's just showing you how irresponsible the government is and why to buy Bitcoin. See you tomorrow. Peace.