Welcome to the Friday edition of the Ecoinometrics newsletter. Every week we bring you the three most important charts on the topics of macroeconomics, Bitcoin and digital assets. Today we'll cover:
Each topic comes with a small explanation and one big chart. So let’s dive in. In case you missed it, here are the other topics we covered this week:
If you aren’t subscribed yet, hit the subscribe button, to receive this email every week directly in your inbox: Bitcoin just had one the least volatile three months in historyBitcoin isn’t doing great. We have been talking about tons of signs, going from the ETFs flows to the lack of on-chain activity, that show Bitcoin is in a weak period. But the thing that has to be the most frustrating to crypto investors is the lack of volatility in the price. Actually if you take a three months rolling window and measure the amplitude from the lowest to the highest price (as percentage) over that window, Bitcoin just had one of the least volatile three months in history. But you know what? That kind of thing happens in every halving cycle! In every cycle you can find periods like that where the price action looks totally stuck in a relatively narrow interval. And in the end, the price always manages to break out and volatility explodes. The current situation is nothing exceptional. If you are playing the long game, this doesn’t matter.
Inflation is on the way down (if we trust the last few months)Rates cuts and more significant ones are getting more likely after every new data release. Two things. Number one inflation is almost coming down. We just had two months in a row with the headline CPI either being flat or falling month on month. It has been three years since we had not seen that. If we get one more month like that headline CPI is going to head below the 3% plateau it has been stuck on for a year. This is what you see on the chart below. On top of the actual trajectory of the inflation rate we have added the annualized rate using the last six months of inflation (blue) and the last three months (orange). The 3-months annualized rate just dipped to 1.1% thanks to the last couple of months. And the 6-months annualized rate is just below 3%. You can bet the Federal Reserve is going to use that to say there is no need to wait longer before cutting rates. But there is more (see next section).
Unemployment in the US is above 4%The recovery from the COVID recession in the US has been exceptionally quick. In 2022, two years after the lockdowns, the unemployment rate was back to an extremely low level. The same level as before the pandemic, roughly 3.6%. Of course that has been a big issue for the Federal Reserve which has been attempting to limit wage growth in order to tame inflation. But things are changing on that front too. As you can see on the chart below the unemployment rate is clearly on the rise. It is now higher than the pre-pandemic level at 4.1%. And that’s exactly the kind of trend the Federal Reserve to be able to say that wage growth has to start slowing down with a softer job market. That’s the second argument they have already been putting forward to prepare the market for the upcoming rate cuts. So the rate cuts are coming for real this time. The question is, are difficulties also coming for the US economy at the same time? I know that a 4% unemployment rate is a very low number historically speaking. So you might think there is no need to worry. But I also know that when the unemployment rate is on a persistent uptrend the US is usually moving into a recession. Better keep an eye on it.
That’s it for today. I hope you enjoyed this. We’ll be back next week with more charts. Cheers, Nick P.S. We spend the entire week, countless hours really, doing research, exploring data, surveying emerging trends, looking at charts and making infographics. Our objective? Deliver to you the most important insights in macroeconomics, Bitcoin and digital assets. Armed with those insights you can make better investment decisions. Are you a serious investor? Do you want to get the big picture to get on the big trades? Then click on the button below. You're currently a free subscriber to Ecoinometrics. For the full experience, upgrade your subscription.
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Friday, July 12, 2024
Bitcoin’s volatility is extremely low
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