📈 Bitcoin Sets a New All-Time High!

🐺 Hi pack-mates,

This is Howling Markets, the only newsletter that will stick around in the long term, just like Euro Zone’s inflation is doing!

Today we will be covering:

• Education: Which Are the Main Inflation Aggregates? 🎢

• Euro Zone’s Sticky Inflation Reduces Probability of a Rate Cut ✂️

• Bitcoin Sets a New All-Time High! 📈

• Equity and Debt Markets Daily Update ⚖️

• And more!

Market Watch 👀

Which Are the Main Inflation Aggregates?

When it comes to measuring inflation, every state prefers a different tool depending on their own characteristics and needs, but every one of them uses different aggregates to determine their monetary policy decisions.

For example, the United States measure both the Consumer Price Index (CPI) and the Personal Consumption Expenditures (PCE), however, regardless of their preferred measurement, the Feds analyze three different aggregates to spot the best economic conditions to hike or cut their policy rates.

The three main inflation aggregates are inflation, core inflation and supercore inflation, all of which are based on a consumption bundle whose price is tracked over the years, what changes are the types of items in it.

If we measure headline inflation using the PCI, the basket of goods will be extremely varied, and it will contain all fundamental expenses that are incurred by the average household. The classic CPI bundle usually contains housing, food, energy, transportation, medical bills, services and much more.

However, this general and varied bundle carries a fundamental issue caused by the fact that some of the items in it are characterized by a strong lag in its price adjustments, meaning that when inflation first picks up, they still tend to maintain their lower prices and once inflation starts to slow down, the price of these lagging items starts to increase.

Because of this, core inflation was introduced by removing tobacco, alcohol, energy and food items from the headline bundle. Not only these items tend to be extremely laggy, but they are also characterized by a higher volatility than the other components, so the central banks prefer to focus on this restricted bundle for their monetary choices.

However, core inflation maintained the component which is most subject to inflation lag: housing expenses. Because of this, the Federal Reserve has recently started observing a new aggregate called supercore inflation. This inflation metric removes from the headline inflation not only food and energy, but also housing, to help the Feds focus on the current price level.

Bitcoin Sets a New All-Time High!

After almost two years of negative returns and a long recovery period, Bitcoin has finally managed to breach its all-time high and to breach once again the $69,000 barrier.

This exceptional performance was achieved thanks to the attention that the halving and the spot EFTs have been bringing to the cryptocurrency market, and especially to Bitcoin.

The halving is a periodical and recurring activity programmed within the Bitcoin network which reduces by half the block rewards obtained by the miners after adding a new block to the blockchain. Halvings have a strong effect on Bitcoin’s price as they reduce by half the increase in Bitcoin’s supply, magnifying the effect of a surge in demand.

This event, paired with the surge in demand caused by the launch of spot ETFs, caused an explosive mix for the largest cryptocurrency in the world, pushing it to over $69,000, setting a new record high.

Since the beginning of the year Bitcoin has gained over +50%, but if we extend the time horizon to the start of 2023, the token has gained more than +310%, meaning that it has more than tripled its value in just over one year.

Today’s Howling Question

And now, it is time for our howling question!

We have just discussed how Bitcoin has just reached its all-time high and that it has been having an exceptional performance since the beginning of 2023. Do you know how Ether has been performing over the same time frame?

1. -10%

2. +25%

3. +65%

4. +135%

5. +190%

Try to answer the question by yourself, and then check the correct answer after the last interesting news!

Euro Zone’s Sticky Inflation Reduces Probability of a Rate Cut

The Euro Zone has just published its inflation figures and the investors aren’t happy about them!

Considering that last year’s annual inflation rate in the Euro Area clocked in at +2.8%, both the markets were expecting a significant slowdown of the prices due to the extremely high policy rates that are being kept high longer than expected.

The market consensus unanimously forecasted a decrease in annual inflation rate down to +2.5%, however the inflation data came in a little hotter than that at +2.6%.

The main reason of this underperformance is the sticky core inflation that has been characterizing the Euro Area over the past couple of years. European investors forecasted a drop in core inflation from +3.3% to +2.9%, but in reality, core inflation only decreased to +3.1%.

These differences, which might seem very minimal at first, represent a clear divergence from the expected results of the monetary policy and the actual effects, showing that it might take longer than expected to reach the 2% inflation target.

These news are especially relevant if we consider that on Thursday Christine Lagarde, ECB’s president, will announce and discuss the newest changes in the Euro Zone’s monetary policy. Due to the adverse inflation data, almost everyone is expecting that the rates will remain unchanged and that there will be little to no mention to the first rate cut.

Equity and Debt Markets Update

And now, our daily markets update!

After weeks of low volatility, the S&P 500’s price took a big fall during Tuesday’s trading session. Since the start of the day the price kept falling and it dropped as low as -1.5% before slightly recovering and closing the day just -1.02%.

Strangely enough, on Tuesday also bond yields, which usually move in the opposite direction of stocks, took a big dive. The benchmark 10-year US government bond yield traded below its previous support level, and it closed the day -1.49% lower.

Answer

The correct answer is 5) +190%.

Despite not performing quite as well as Bitcoin, Ether has returned +197.85% since the beginning of 2023. However, ETH’s price is still almost 30% lower than its all-time high set at the end of 2021.

Howl-Worthy Memes 😂

🐺 See you next time!

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