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"Hang on"
Aurelie Barthere
Key Takeaways
9 min read
  • We see a high risk for the US terminal rate to be revised higher than 5.25%-5.5%, which is what several Fed voting members have hinted at last week
  • Fed Chair Powell's messaging and US labor data reporting this week will be key to confirm this projection
  • The combination of a potentially higher US terminal rate, and many regulatory inquiries is not exactly a tailwind for crypto
  • BTC prices hang by a thread (narrow range between 22,160 and 22,642 since Thursday)
  • If Silvergate reports "just" a lower-than-5% capitalization ratio, prices can maybe hold. A bankruptcy would probably lead to lower prices
  • The interesting part is crypto price sensitivity: crypto prices have been relatively resilient despite the accumulation of “bad news"
  • The regulatory wall-of-worry will take some patience to climb (probably most of 2023 and some of 2024)
  • On Macro, we need rates to go lower: A 5.5%+ yielding US Treasury bill is more attractive that most risk assets, including crypto
  • Lower rates would only probably come after "something breaks" (see ongoing negative newsflow on REIT vehicles and latest default of Blackstone commercial-real-estate-backed bond)


Hot European inflation and global services economy in full bloom

France, Spain, Germany, Italy all reported higher-than-consensus CPI prints for February, leading to an aggregate for the Eurozone of 8.5% YoY vs 8.2% expected, and barely 10bps below January. Talk about “sticky”. The following drivers are at play:

  • Energy inflation is coming down but still tracking at ~14% YoY
  • Food inflation (~15% YoY) is still up because it is lagging energy. It will very likely weaken at some point this year (global FAO food indices have come down)
  • Core inflation remains sticky at 4.5% - 6% YoY. This will be the battleground of the European Central Bank (ECB), this and historically strong wage growth

The PMIs...