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: Half a Year of DrawdownThe Federal Reserve just announced a 50bps rate cut, and the market is celebrating. But we'll see how long that lasts. Fundamentally, not much has changed so far. While Bitcoin is having a good day (for once), it's worth noting that it has been in a drawdown for what is historically a pretty long time:
As you can see on the chart, this duration for a drawdown is uncommon for Bitcoin. At least much less common that the current drawdown of the NASDAQ 100. Historically with Bitcoin either the drawdowns last less than 200 days or they become very long drawdowns (cut out from the chart). The path of rate cuts laid out by the Federal Reserve might not be enough to get us out of this situation. What really matters is whether the US enters a recession or manages a soft landing.
Ethereum Is StrugglingEthereum has had a tough year. Unlike Bitcoin, ETH is basically flat for the year. The Bitcoin ETFs launch at the start of the year didn't help ETH much. Even the launch of its own ETFs in July failed to boost its price. We recently discussed why I'm skeptical about Ethereum's short-term potential in the newsletter. It looks like there just isn't enough money flowing into crypto to make a real difference for ETH. The chart clearly shows the divergence between Bitcoin and Ethereum's performance since the bottom of the bear market. While Bitcoin has seen a 232% increase, Ethereum has only managed a 77% gain (for reference the chart was made just before the FOMC meeting).
Inflation And Rate Cuts TrajectoryCore inflation (CPI) rose year-on-year in August. Yet the Federal Reserve still decided to cut rates. Why? The reason is that supercore inflation has dropped significantly. This is what really matters to the Fed right now. Supercore inflation measures price changes (mostly) in the services sector. It's heavily influenced by wages and the overall labor market. Until a few months ago, inflation was deeply entrenched in this area of the US economy. The fact that it's now trending down means the main cause of the Fed's inflation worries is fading. This gives them room to start cutting rates without immediate concerns about inflation returning.
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, September 20, 2024
Bitcoin: Half A Year Of Drawdown
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