Bitcoin is losing ground
Also weak Japanese Yen and inflation around the world
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:
Bitcoin is losing ground against the stock market.
The Japanese Yen is taking a dive against the US$.
Not all regions are equal when facing inflation.
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:
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Bitcoin is losing ground against the stock market
Many investors are optimistic about the latest data.
Prices were flat this month (CPI). The job market is easing up a bit. And the Federal Reserve is likely to cut rates between now and next year.
This makes risk assets look very attractive.
The stock market benefited from this. Since last month, the NASDAQ has nearly doubled its performance for the year.
You’d think Bitcoin would benefit too. But it hasn’t. Bitcoin is stuck in the mid-$60k range and can’t break out.
Bitcoin will eventually follow the NASDAQ’s trend. I don’t see any reason why it wouldn’t. But right now, demand is weak.
The Japanese Yen is taking a dive against the US$
The Federal Reserve and the Bank of Japan have divergent monetary policies.
The Federal Reserve chose to hike rates since 2022. The Bank of Japan chose to keep them around 0%. And the rate differential that has created is making the Yen much less attractive than the US$.
This is making the Yen significantly weaker. And that’s hurting Japanese consumers for anything that’s imported. What are the chances this is going to push more Japanese to take another look at Bitcoin as a savings tool?
Not all regions are equal when facing inflation
The 2% target for the inflation rate is kind of arbitrary when you think about it. Why 2% and not 1% or 3%?
The Fed chose 2% in 2012, believing it balanced stable prices and job growth. But it was just a guess.
Economics is not a hard science. Inflation is complex, with many factors affecting it. Fixing on 2% ignores these variables.
Different regions might do better with different targets. Some may need 1% inflation, others 3%. One size does not fit all.
And actually when you look at inflation around the world there is a wide range of situations.
For obvious reasons Europe is the most homogenous region when it comes to inflation. And the European Central Bank has the same target as the Federal Reserve.
But other regions of the world are much less homogeneous.
Obviously I don't have a crystal ball, but if the Federal Reserve decides that it is in their best interest to move the inflation target they have plenty of arguments they can make to support the change.
So don't be surprised if the target moves in the coming years.
That’s it for today. I hope you enjoyed this. We’ll be back next week with more charts.
Cheers,
Nick
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