2026-02-06 22:47:35
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To investors,
Bitcoin is crashing and investors are freaking out. The asset is down 5% in the last 24 hours, down 20% in the last week, and down 30% in the last month. As if that wasn’t bad enough, bitcoin hit $60,000 last night which means the digital asset had fallen more than 50% from the latest all-time high price of $126,000.
Raoul Pal pointed out the fear and greed index was sitting at 5 out of 100 yesterday. I don’t think I have ever seen the metric come in that low.
Bitcoin Archive shows the 4-week RSI has only been lower once in the history of bitcoin.
So why is bitcoin falling?
That seems to be the trillion dollar question. The easy answer, of course, is there are more sellers than buyers, but that doesn’t satisfy the millions of bitcoin holders who were looking for hyperbitcoinization or the 6-figure price predictions from their favorite social media influencer.
The truth is that bitcoin is selling off for a variety of reasons. First, there was a psychological milestone at $100,000 that seems to have unlocked sellers of bitcoin that had held the asset for a long time. The adoption of bitcoin by Wall Street giants like Blackrock and Fidelity may have signaled bitcoin’s conquest was achieved in the mind of early cypherpunks and bitcoin believers.
The second reason is that bitcoin has become highly financialized compared to its previous state as a spot asset that investors could simply buy and hold. I will share more on this in a minute.
The third reason is the four-year cycle has been a concept in bitcoiner’s minds for more than a decade. Whether it is real or not, many holders were prepared to sell their bitcoin about 18 months after the halving with the hopes of buying more bitcoin back later at lower prices. Anticipation creates action and actions create reality.
And lastly, bitcoin is a forward-looking market. When investors believed inflation was on the horizon in 2020, they rushed to buy bitcoin in advance, which led to a 600% increase in the asset price. Now that deflation is a bigger risk than inflation, I believe a portion of investors realized that bitcoin (an inflation-hedge asset) should sell-off when that deflation becomes obvious to everyone.
So there is not one single reason you can point to as the culprit of the recent drop in price for bitcoin. But I want to dig a little deeper on the idea of bitcoin as a financialized asset.
The first aspect of this story is the increased ways to gain exposure to bitcoin. Many bitcoiners incorrectly believe that scarcity has been negated in bitcoin because of these new instruments. For example, here is a post from a popular account that has racked up 2 million views since yesterday:
“The moment supply can be synthetically created, scarcity is gone. And when scarcity is gone, price stops being discovered on-chain and starts being set in derivatives. That is exactly what happened to Bitcoin. And it’s the same structural break that already happened to gold, silver, oil, and equities.
Once derivatives took over the original Bitcoin thesis is broken. Bitcoin’s valuation was built on two ideas: a hard cap of 21 million and no rehypothecation. That framework died the moment Wall Street layered this on top of the chain:
→ Cash-settled futures
→ Perpetual swaps
→ Options
→ ETFs
→ Prime broker lending
→ Wrapped BTC
→ Total return swaps
From that point forward Bitcoin supply became theoretically INFINITE. Not on-chain. But in price discovery, which is what actually matters. Synthetic Float Ratio (SFR). The metric that explains everything. Once synthetic supply overwhelms real supply, price no longer responds to demand.
It responds to positioning, hedging, and liquidation flows. Wall Street can now trade against Bitcoin. They’re not guessing direction. They’re doing what they do in every derivatives-dominated market: Create unlimited paper BTC. Short into rallies. Force liquidations. Cover lower. Repeat.
This isn’t “betting.” It’s inventory manufacturing. One real BTC can now simultaneously back an ETF share, a futures contract, a perpetual swap, an options delta, a broker loan, and a structured note. All at THE SAME TIME. That’s six claims on one coin. That is not a free market. That is a fractional-reserve price system wearing a Bitcoin mask. Ignore it if you want, but don’t pretend you weren’t warned.”
That sounds really bad and scary, right? Well, like all good conspiracy theories, it only has a hint of truth to it. There has been no change to the scarcity of bitcoin. There will only ever be 21 million coins. The monetary policy is not changing, neither is the total supply.
However, it is true that the increased financial instruments give sophisticated investors more tools to express their view in the market or to manipulate the price in a given direction. So don’t believe the doomsday prediction of synthetic bitcoin supply, but understand that market dynamics have fundamentally changed. There are new players with new tools and a very different approach than the hardcore believers of the past.
The second theory related to financialization is that the increased participation in bitcoin ETFs could be behind the recent sell-off. TheOtherParker explains it well when writing:
“This was the highest volume day on $IBIT, ever, by a factor of nearly 2x, trading $10.7B today. Additionally, roughly $900M in options premiums were traded today, also the highest ever for IBIT. Given these facts and the way $BTC and $SOL traded down in lockstep today (normally SOL trades with beta) + the relatively lower liquidations on CeFi exchanges, this leads me to believe that the nexus of the problem lies with a large IBIT holder. IBIT has become the #1 venue for BTC options trading, so my guess is that a hedge fund trading IBIT options is the culprit.
If you look at the 13F filings for IBIT, you’ll find a number of interesting names that have the majority of their fund in IBIT. In fact, there are a few in there (not naming names) that have 100% of their fund in IBIT, which likely means no cross margin. In fact, the biggest reason to set up a fund to hold a single asset would be to isolate margin, so that if the trade blew up, the brokers wouldn’t have claim to any other assets.
Interestingly, most of these giant, single asset funds are based in HK. We know that Asian traders, particularly in China, have been deeply involved in the Silver and Gold trade. Silver was down 20% today, which was the 2nd largest 1 day move in a very long time (largest on Jan 30). We also know that the JPY carry trade has been unwinding at an increasingly rapid pace.
This leads me to think that the culprit for the IBIT blowup today was 1 or more HK-based non-crypto hedge funds. As @FranklinBi pointed out, the fund(s) being non-crypto would explain why no one sniffed them out. They would likely have few/no crypto counterparties, meaning complete isolation from CT.
The last small piece of evidence I have is that I personally know a number of HK-based hedge funds that are holders of $DFDV, which had the worst single down day ever, with a meaningful mNAV decline. The mNAV had been holding steady surprisingly well throughout this pull back until today. One of these fund(s) could have been connected to the IBIT culprit, as I highly doubt a fund taking that large of a position in IBIT and using a single entity structure would only have the one fund.
Now, I could easily see how the fund(s) could have been running a levered options trade on IBIT (think way OTM calls = ultra high gamma) with borrowed capital in JPY. Oct 10th could very well have blown a hole in their balance sheet, that they tried to win back by adding leverage waiting for the “obvious” rebound. As that led to increased losses, coupled with increased funding costs in JPY, I could see how the fund(s) would have gotten more desperate and hopped on the Silver trade. When that blew up, things got dire and this last push in BTC finished them off.”
This theory of IBIT holders being caught offsides doesn’t seem crazy to me. Is it the reason for bitcoin’s 50% decline in the last 4-5 months, definitely not. Could it have exasperated the situation, especially yesterday when there was such a severe sell-off? Absolutely.
Forced sellers tend to make assets do volatile things. And to say yesterday was volatile would be an understatement.
The good news is that bitcoin’s recent sell-off is not nearly as bad as past bear markets. Pierre Rochard points out this is the least worst bitcoin “bear market.”
Bitcoiners were built for this type of chaos in markets. They have held the asset through many 50%+ drawdowns. In fact, bitcoiners have experienced a 50% drawdown in the asset approximately every 18 months for the last decade.
That is a Global Financial Crisis every year and a half. Not bad for a bunch of people on the internet with a crazy dream to reimagine the monetary system.
Have a great weekend. I will talk to everyone on Monday.
- Anthony J. Pompliano
Founder & CEO, Professional Capital Management
Jeff Park is a Partner & Chief Investment Officer at ProCap Financial. In this conversation, we discuss bitcoin’s recent drawdown and whether the market is in a true bear phase, the current interest rate backdrop, and the Fed’s role in today’s economy.
We also cover the nomination of Kevin Warsh as Fed chairman, Jeff’s outlook on precious metals, and a warning on one asset he believes investors should avoid going forward.
Enjoy!
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Bitlayer - Bitlayer is powering Bitcoin beyond just a store of value, making Bitcoin DeFi a reality while staying true to its core principles of security and decentralization. Learn more about Bitlayer at https://x.com/BitlayerLabs
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🚨READER NOTE: If you want to sponsor The Pomp Letter, you can fill out this formand someone from our team will get in touch with you.
You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.
2026-02-04 23:57:10
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2026-02-02 22:42:59
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To investors,
There is a national crisis unfolding in the US economy, but it isn’t the type of crisis you got used to over the last few years. Rather than the persistent risk of high inflation driven by out of control government spending, the economy is being swallowed by an expansive deflationary force.
This new risk is dangerous because it requires humans to update their mental models to be able to identify, understand, and mitigate it. And we know humans are horrible about changing their mind, especially when it requires them to synthesize new information.
First, let’s discuss where the challenges lie in identifying this deflation risk. There is a past experience issue and a modern data error that is driving the problem. The past experience issue is that an entire generation finally capitulated in recent years after realizing that undisciplined government spending led to higher levels of inflation. These folks failed to see the cause and effect coming out of the global financial crisis and they only took the lesson to heart after the pandemic era insanity that drove inflation over 9% in the government’s data.
The folks in this cohort are now trained to look at government spending and conclude that inflation will rise if the national debt is increasing. That was true in the past, but it is not true right now, which is why I call it a “past experience issue.” People are looking at the inputs, but not thinking critically about what that means for modern outputs.
The second big issue is a modern data error. Most of the “experts” and mainstream reporters are still relying on the Bureau of Labor Statistics to tell them what the inflation reading is. It doesn’t matter that the BLS is estimating more than 40% of the CPI inputs, nor does it matter that the BLS continues to manipulate the data collection by leveraging unproven and discredited methods.
These people simply believe whatever the government says.
The Bureau of Labor Statistics is reporting inflation to be 2.7% year-over-year. But compare that number to Truflation, which is reporting inflation under 0.9% as of yesterday.
This is a very wide gap in the metrics. In fact, the most concerning part is that the BLS is saying inflation is almost 50% higher than the Fed’s stated target, yet Truflation is saying inflation is more than 50% lower than the Fed’s stated target.
The sky can’t be blue and green at the same time, nor can inflation be high and low simultaneously either.
It is no secret that I trust the Truflation data much more than the BLS. Truflation uses more than 14 million daily data points provided by over 40 independent data providers. I’ll take the real-time, verifiable metric over the lagging, estimated metric any day of the week.
But this brings us back to the most important question in the economy today…why is inflation falling if the government is continuing to print money like drunken sailors?
This is where the deflationary force swallowing the US economy comes in.
There are three main contributors in my mind:
Tariffs are deflationary, not inflationary. I know this is still heavily debated, but I continue to explain that tariffs bring down domestic prices over time and they change consumer demand trends. There are anecdotal businesses that will show their input costs are rising, which is then being passed on to the consumer, but those anecdotes are heavily outweighed by the aggregate impact of tariffs on the US economy.
Artificial intelligence is the largest deflationary force of our lifetime. Companies are literally bragging on a daily basis how they are being more productive with less employees. The industry is moving so fast that it is hard for most people to keep up and the economic incentive to adopt this technology is only going to get larger. Lastly, A.I. is now in the “exponential production” phase where A.I. is writing code, so we are no longer limited by human time and energy.
Robotics is a subset of the A.I. story, but it deserves its own call out. It is very obvious that self-driving cars are going to be cheaper and safer, so they will become the standard. Companies like Amazon are the perfect example…the e-commerce giant employs 1 million robots and 1.5 million humans. They are reportedly looking to replace 500,000 jobs with robots in the coming years, which means they will soon have more robots working at the company than humans. This is highly deflationary.
This is the three-headed monster: tariffs, artificial intelligence, and robotics.
It doesn’t matter how much money the government prints, the elected officials literally can’t spend enough money to negate the deflationary forces that are swallowing the US economy. And yes, that would have been an insane statement just 3 years ago, but today it is the reality.
New information means you have to change your mind.
Finally, this brings us to the important question of what should we do from here?
Now that inflation is under 1%, it is obvious that the Fed should do an emergency 50 basis point cut. They don’t have the luxury of waiting longer. Artificial intelligence is accelerating, which means the deflationary force is only going to get stronger and more pervasive.
You can think of this as a virus. Once it was unleashed, it cannot be contained and it will not slow down. The only thing we can do is address the threat using other measures within our control.
Companies and people are economically incentivized to use A.I. more. The A.I. tools are starting to exponentially produce more A.I. products and services (ex: Claude Code writing 100% of the code for Claude Cowork, etc). Google “exponential curve” if you want to see how fast this will compound.
There needs to be an immediate, aggressive rate cut by the Fed or they risk a deflationary situation.
Consumer prices of various goods will come down, which is a positive outcome for the average American in the short-term, but wages can fall, unemployment can rise, debt can become more burdensome, and there is a potential for a deflationary spiral.
We need a 50 basis point emergency rate cut. Again, I know this will sound crazy to some of you, but I implore you to ask yourself “do I still believe that inflation has to happen if the government is spending money? Do I understand the effects of artificial intelligence, tariffs, and robotics on prices of goods and services? Am I willing to bet a material part of my net worth on assets that can only succeed if inflation is higher than normal?”
If the answer to any of those questions is “maybe” or “no,” then you have work to do. Spend the time this week learning about these things. Start by asking your favorite LLM to explain these topics and issues to you like a 5-year old. Even better, connect your accounts to Silvia and have her tell you what would happen in a deflationary environment or if the US government runs the economy hot.
Almost no one could have predicted the economy running hot without inflation, but here we are. High-growth, low-inflation. The dream of every politician and central banker in the world.
Hope you all have a great start to your week. I will talk to you next time.
- Anthony J. Pompliano
Founder & CEO, Professional Capital Management
Jordi Visser is a veteran macro investor with 30+ years of market experience and the author of the VisserLabs Substack.
In this episode, we unpack the Federal Reserve rate pause, the case for a more forward-looking Fed, and how rapidly advancing AI is reshaping inflation vs. deflation expectations. We also explore the scarcity trade across bitcoin, silver, energy, and semiconductors—and how investors can think about positioning as physical constraints collide with abundant software.
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Bitget - Bitget is the world’s largest Universal Exchange (UEX), serving over 125 million users with access to over 2M+ crypto tokens, and TradFi markets such as 100+ tokenized stocks, ETFs, commodities, FX and precious metal like Gold.
Gemini - Earn crypto rewards on every purchase with the new Gemini Credit Card.
Abra - This podcast is sponsored by Abra. Abra is the secure way to access crypto and crypto based yield and loan products through a separately managed account. To create an account, click here for individuals and here for entities.
BitcoinIRA - Buy, sell, and swap 75+ cryptocurrencies in your retirement account. Pay less taxes. Earn up to $1,000 in rewards.
Arch Public - Arch Public’s cutting-edge algorithm tools ignite profits, harnessing razor-sharp data analytics to nail perfect entries, exits, and risk management. Turn volatility into opportunity and do it hands free with Arch Public. (Oh, and yes, try us out for FREE too!)
Simple Mining offers a premium white-glove Bitcoin mining service. Want to grow your Bitcoin stack? Visit https://www.simplemining.io/
Bitlayer - Bitlayer is powering Bitcoin beyond just a store of value, making Bitcoin DeFi a reality while staying true to its core principles of security and decentralization. Learn more about Bitlayer at https://x.com/BitlayerLabs
🚨READER NOTE: If you want to sponsor The Pomp Letter, you can fill out this formand someone from our team will get in touch with you.
You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.
2026-01-30 22:46:18
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To investors,
President Trump announced the nomination of Kevin Warsh as the next Chairman of the Federal Reserve. Warsh will still have to go through the Senate confirmation process, but I want to spend our time today understanding who Warsh is, what his economic policy ideas are, and how the economy will be impacted if he implements his ideas.
There are a few key things about Kevin Warsh’s background that I think are noteworthy:
He has degrees from Stanford, Harvard, and MIT’s Sloan School of Management
He started his career at Morgan Stanley and then served in the White House Economic Council under George W. Bush
He became the youngest-ever Fed Governor (age 35) in 2006
He was a Fed Governor throughout the Global Financial Crisis
He has served as a Partner at Stanley Druckenmiller’s family office for over a decade since leaving the Fed Governor role
This last point about Druckenmiller is important. Treasury Scott Bessent is also a Druckenmiller partner/mentee, so Warsh’s nomination marks the second person from Druck’s professional lineage to take an important role in this administration’s economic and monetary policy management.
Historically, Warsh has been hawkish. He believes controlling inflation through higher interest rates was the correct path to pursue. For example, Warsh dissented against the ridiculous QE stimulus during the GFC. He made strong arguments that the QE tools would distort markets, risk inflation, and erroneously expand the Fed’s remit outside its core mandate.
You will see lots of headlines about Warsh being a hawk, along with predictions that interest rates are going to be raised and asset prices will not do well under his tenure.
But the thing most people are missing is that Warsh has essentially changed his mind in recent years. Most recently, the new Fed Chair nominee has been supporting lower interest rates instead of higher ones. His general view seems to be that artificial intelligence is driving significant productivity gains, which he sees as deflationary. This has led Warsh to criticize the Fed numerous times on having interest rates too high right now.
You don’t have to be Albert Einstein to realize why Trump would like a guy who wants the Fed to lower interest rates.
The most interesting part of Warsh’s recent policy view is the idea of “regime change” at the Fed. Admittedly, there is not a ton of information out there on his entire strategy, but the belief is that Warsh wants to shrink the Fed’s balance sheet so there can be larger interest rate cuts. He also wants the Fed to stay focused on price stability and employment, rather than become distracted with the recent fascination of climate change and DEI.
Lastly, and maybe most different, Kevin Warsh believes the Fed leadership should not talk publicly as much as they do. Kevin Gee shared this great transcript of Warsh on CNBC’s Squawk Box explaining why he thinks this is important:
If you believe everything you read and see online, it looks like Warsh is going to pursue lower rates, a strict Fed mandate, and do his best to drive economic growth in the real economy. Each of those ideas sound good to me.
Now I have seen a lot of bitcoin holders on X asking what Warsh’s views on bitcoin would be, so thankfully we have a video from deep in the archive of Warsh saying positive things about the digital asset.
You can watch it by clicking here.
VanEck’s Matthew Sigel pulled out the most important part of the transcript:
“You made reference to Bitcoin and I thought I heard a little condescension in your voice, that people are buying Bitcoin.
It could provide market discipline, it could tell the world that things need to be fixed. Bitcoin does not make me nervous.
The underlying technology in that white paper, it’s just software. It’s just the newest, coolest coolest software that will provide us the opportunity to do things we could never have done before.
Can the blockchain software be used for both good an evil? Yes, both like all software. But by building it here in the US, that gives us the opportunity to be more productive and create something very special over the next decade…
I think of bitcoin as a lot of things, but certainly with every passing day getting new life as an alternative currency.”
You could summarize Warsh’s bitcoin views as a belief that it could become a store-of-value like gold, but he does not believe it will be a substitute for the US dollar.
If Kevin Warsh implements lower short-term rates, we should expect to see growth take off. This would lead to higher prices across stocks, crypto, and risk assets. If we get the balance sheet reduction that he seems interested in, you could see tightened liquidity and potential pressure on gold and the dollar.
When it comes to artificial intelligence, the productivity boom, and deregulation, it wouldn’t be crazy to expect inflation to stay under control and the promised “economic boom” to accelerate.
My big takeaway is that the Trump administration is trying to engineer a high-growth, low-inflation economy. They are using every economic or monetary policy tool at their disposal. But Jerome Powell and the current Fed regime are not helping the administration, rather they are actively working against their goals. So now Trump has nominated someone who understands global finance, has experience working inside the Federal Reserve, and appears to be ready to implement monetary policy decisions that will be conducive to the administration’s plan.
It will be very interesting to see what happens. But the speculation is over. Kevin Warsh is the nominee. Now we all hold our breath and see what he actually does once he is in office.
Hope you all have a great end to your week. I will talk to everyone on Monday.
-Anthony J. Pompliano
Peter Schiff is the Chief Economist of Euro Pacific Asset Management and the Chairman of Schiff Gold. In this conversation, we discuss the state of the U.S. economy, inflation, tariffs, the weakening dollar, and the outlook for gold, silver, and bitcoin. We also dive into global trade, monetary policy, and engage in a heated debate over whether tariffs and a weaker dollar help or hurt the economy.
Figure – Enter to win $25k USDC with Democratized Prime while earning ~9% APY! They also have the lowest industry interest rates at 8.91% with 12 month terms! Take out a Bitcoin Backed Loan today and buy more Bitcoin. Check out Figure! Figure Lending LLC dba Figure. Equal Opportunity Lender. NMLS 1717824. Terms and conditions apply.
Award-winning Fountain Life - Energy supercharged. Memory sharper. Life extended. Ready for the best investment you’ll ever make? Schedule a life-changing call at www.FountainLife.com
Bitget - Bitget is the world’s largest Universal Exchange (UEX), serving over 125 million users with access to over 2M+ crypto tokens, and TradFi markets such as 100+ tokenized stocks, ETFs, commodities, FX and precious metal like Gold.
Abra - This podcast is sponsored by Abra. Abra is the secure way to access crypto and crypto based yield and loan products through a separately managed account. To create an account, click here for individuals and here for entities.
Gemini - Earn crypto rewards on every purchase with the new Gemini Credit Card.
BitcoinIRA - Buy, sell, and swap 75+ cryptocurrencies in your retirement account. Pay less taxes. Earn up to $1,000 in rewards.
Arch Public - Arch Public’s cutting-edge algorithm tools ignite profits, harnessing razor-sharp data analytics to nail perfect entries, exits, and risk management. Turn volatility into opportunity and do it hands free with Arch Public. (Oh, and yes, try us out for FREE too!)
Simple Mining offers a premium white-glove Bitcoin mining service. Want to grow your Bitcoin stack? Visit https://www.simplemining.io/
Bitlayer - Bitlayer is powering Bitcoin beyond just a store of value, making Bitcoin DeFi a reality while staying true to its core principles of security and decentralization. Learn more about Bitlayer at https://x.com/BitlayerLabs
🚨READER NOTE: If you want to sponsor The Pomp Letter, you can fill out this formand someone from our team will get in touch with you.
You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.
2026-01-29 00:13:54
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2026-01-26 23:05:36
Figure’s building the future of capital markets through blockchain with $20B unlocked in equity.
Use Democratized Prime for your chance to win big with $25k USDC and Earn ~9% APY. The more you participate, the better your odds!
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To investors,
If you listened to the Fed for the last few decades, you made a lot of money. When the Fed was easing, you could have just plowed your money into the market. When the Fed started tightening, all you had to do was sell everything and hide in cash for a few years.
Investors have been yelling “don’t fight the Fed” for a long time.
But I don’t think that old adage applies the same way anymore. At least it doesn’t apply right now. Let me explain…
The US economy, and corresponding financial markets, have been hyper sensitive to the Fed’s monetary policy decisions for the last ~ 30 years. The central bank was cutting rates in the mid-to-late 1990s, which helped propel the internet boom higher. Finally, when the Fed started to raise rates in the second half of 1999, the tech bubble popped shortly afterwards and everything came back down to reality.
During the Global Financial Crisis, the Fed invented the insane Quantitative Easing policy that led to a prolonged period of 0% interest rates and hundreds of billions of dollars bring printed. This QE playbook kicked off a decade-long bull market that made every stock market bear look like a fool.
Finally, during the 2020 pandemic, the Federal Reserve pulled out the old QE playbook again. Interest rates went to 0% via two emergency cuts and the government decided to print trillions of dollars, which created more than 9% inflation within a 24-month period.
The main thing that stopped the 2021 party was the Fed’s decision to reverse course and start hiking interest rates at the fastest pace in history. We went from 0% to over 5% rates in a very short period of time. The regime shift was so abrupt that multiple banks failed because of their inability to navigate the volatility.
This brings us back to the “don’t fight the Fed” adage. It made sense because the Federal Reserve would set policy and the world would react to those decisions. Quite literally, the Fed was in control.
That doesn’t seem to be the case right now though.
The current President and his administration have effectively taken control of the US economy and financial markets. They have implemented a set of policies to reimagine the country, including deregulation, tax cuts, smaller government, and re-shoring of American jobs and manufacturing.
In taking this approach, the government is rapidly changing the economic conditions of the market and it is putting the Fed on their back foot. The central bankers already had a hard enough time trying to make monetary policy decisions based on faulty data from the Bureau of Labor Statistics. Now these folks are being asked to understand substantial changes across the economy, including policy differences and advancements in cutting-edge technology like artificial intelligence.
This is why I don’t believe the Fed is in control anymore. In fact, I think the exact opposite is true. The market is forcing the hand of the Fed. America’s central bank begrudgingly cut interest rates at the end of 2025 because the labor market was softening at a much faster pace than forecasted. The softness in the labor market was not due to normal business cycle developments, but rather a combination of policy decisions and technology innovation.
Jerome Powell essentially said he and his colleagues were more worried about the labor market than about inflation coming back. But the Fed’s fight against the market is not over yet. My base case is that inflation is going to continue falling in the coming months.
Truflation is reporting inflation at 1.2% as of last night. If you take the BLS’ methodology, and you replace the ~ 40% of inputs that are estimations with accurate measurements of the input goods, then Truflation shows inflation would be less than 1% year-over-year.
The big takeaway from this situation, according to Truflation, is that inflation has collapsed from its recent peak, dropping 151 basis points in just three months.
Truflation’s real-time data, which is sourced from over 14 million daily price points across 40+ independent providers, captures this deceleration far faster than traditional metrics, revealing a pricing environment that’s shifted decisively toward disinflation. For investors, this signals a fundamental reset in cost pressures that official data will only confirm weeks later.
So what is my big takeaway from this situation?
The Federal Reserve has lost control of the economy. They are serving at the pleasure of market forces now. The labor market is weakening, inflation is falling aggressively, artificial intelligence is a very real deflationary force, and productivity is booming thanks to the deregulation, tax cuts, and reshoring.
It does not matter what the Fed thinks they should do right now. The old playbook is out the window. We have supply-side economics taking over. We are seeing high-growth and low-inflation. The Fed is having their hand forced. They need to cut interest rates by about 100 basis points in the next few months, but they also will have to participate in the timeless act of printing more money.
The US economy may be booming, yet the inflation data is telling us that we could have a major problem on our hands if the Fed doesn’t stimulate more economic activity. For the trigger happy Fed, this should be their Super Bowl. Cut rates and let the economy fly.
Hopefully the great people at our central bank are paying attention.
Have a great start to your week. I’ll talk to everyone next time.
- Anthony J. Pompliano
Founder & CEO, Professional Capital Management
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Jordi Visser is a veteran macro investor with 30+ years of market experience and the author of the VisserLabs Substack. This was recorded live at the Real Vision 2026 Crypto Gathering.
In this conversation, we discuss the scarcity trade across markets, bitcoin’s potential short squeeze, silver’s role as a critical industrial metal, and the inflation vs. deflation debate. We also explore how AI, robotics, and productivity shifts could reshape markets in the years ahead.
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