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Is now a good time to take out a variable-rate mortgage? Euribor forecasts

Euribor forecasts: variable-rate mortgages

How will the cost of variable-rate mortgages vary in the coming months? To predict this, it is necessary to analyse the central forecasts on Euribor, the European reference interest rate.

What the latest forecasts tell us about the Euribor, or Euro Interbank Offered Rate, which is the average interest rate paid by banks in the eurozone to lend money to each other and the benchmark for variable-rate mortgages.

In recent months, Euribor forecasts, particularly three-month ones, have attracted the attention of many financial industry experts, who have analysed various factors to predict future fluctuations. What is the current Euribor forecast for the last months of 2024?

Euribor forecasts: what will happen in the short term?

The first actor to provide its Euribor forecast is, as one would hope, the European Union, through the ‘Spring 2024 Economic Forecast’, a report analysing, in a broad sense, the economic situation in Europe. 

The executive summary of the document provides an overview highlighting the most important data for the Union, such as the Gross Domestic Product (GDP) growth rate and the inflation rate. It also includes some forecasts on Euribor and the factors that will influence it. 

Of course, the future of the Euribor is closely linked to the decisions of the European Central Bank (ECB) regarding interest rates. These were already reduced by 25 basis points in June and currently stand at 4.25%. According to the Union, these will reach the threshold of 3.2% by the end of the year and 2.5% by the end of 2025.

Chatham Financial expects Euribor to decrease to 3% by early 2025 and 2.7% by the end of next year. 

Erste Group, one of the leading financial institutions in Central and Eastern Europe, has a slightly more optimistic Euribor forecast. After the first interest rate cut in June, the lending institution expects Euribor to reach 3% by the end of the year and 2.6% by July 2025.

Most banks and credit institutions’ forecasts for the last months of 2025 are similar. They all expect the three-month Euribor to fall, possibly dropping below 3% after next summer. This suggests easing the ECB‘s restrictive monetary policies in response to lower inflation.

The impact on variable-rate mortgages

Why are Euribor forecasts important for those who have taken out a variable-rate mortgage or intend to do so shortly? Because the mortgage cost varies precisely according to the fluctuations of this value. Therefore, a decrease in Euribor would reduce the monthly mortgage instalments, thus enabling holders of variable-rate mortgages to save money.

In short, the Euribor forecasts suggest that a favourable market phase for variable-rate mortgages is ahead of us after a few years of very steep repayments! As mentioned in the previous paragraphs, this trend is closely linked to ECB policies and global economic conditions. This information is crucial for borrowers to plan their finances better and consider possible switches to fixed-rate mortgages if more stability is desired.


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Crypto market and ‘Covid crash’: will central banks save us?

Crypto market crash: like the Covid crash of 2020?

In the last few hours, we seem to be reliving the COVID-19 crash of 2020. Could the market restart after central bank intervention, as it did four years ago?

Over the past few days, fear has reigned in the crypto market, which has collapsed along with the stock market. During yesterday’s day, Bitcoin lost more than 15% of its value in less than twenty-four hours, while the NASDAQ and the S&P 500 lost about 5% and 3%. 

The week of 9 March 2020, the markets were shaken by a similar event, albeit characterised by a more pronounced bearish movement. At that time, the collapse was caused by the outbreak of the pandemic and the adoption of lockdown measures by most of the world’s countries.

Look at the Bitcoin chart

Yesterday’s bearish movement, however, seems to have stemmed from a much broader spectrum of factors: the escalation of the conflict in the Middle East, the Japanese Central Bank’s cut in interest rates, and the consequent collapse of the Nikkei, the country’s main stock market index. Then, the crisis of US technology companies and the fear of an economic recession in the US were accentuated by the latest unemployment figures.

What are the similarities between these two market crashes? Not so much in terms of the causes and price movements that have already taken place as in terms of the possible responses of central banks and the associated price rebound.

Crypto market collapse: key figures

Yesterday’s crypto market crash was the most violent since 2022. The Crypto Total Market Cap, the total market capitalisation of cryptocurrencies, fell to $1.7 trillion at its most critical moment, registering a 15% drop. If we analyse the performance from the end of July onwards, the market capitalisation of the entire sector faced a 30% reduction due to the massive wave of liquidations.

The positions of many traders were forcibly closed, with a monetary counter-value of about $1.07 billion on centralised exchanges. The total value of those swept away on-chain, on DeFi protocols such as Aave or Curve, was around $350 million. Finally, the founding rates for Bitcoin and Ethereum futures turned negative. This means most investors have positioned themselves short and are betting on a further price collapse.

Exploits Bitcoin’s Bearish Movement

Some have dubbed yesterday, perhaps exaggerating, ‘Black Monday’, a profoundly negative day comparable to those of the pandemic era. Despite this, however, referring purely to the future scenario concerning the crypto market, it may not be the case to despair too much. There are several reasons to be cautiously optimistic about the future. For instance, the price performance of the most important cryptos in recent hours and the possible impact of an early rate cut by the Federal Reserve (FED), which is becoming increasingly likely.

Covid Crash: price movements

To analyse the current scenario, it may be useful to compare the current situation with the crypto market in 2020. At that juncture, in just a few days, the crypto market lost almost 50% of its total value. The crypto total market cap went from $228 billion to $118 billion, the price of Bitcoin went from $8,000 to almost $4,000, and Ethereum went from $270 to less than $100. Similarly, the performance of the stock market was also affected by the arrival of the pandemic. The S&P 500 lost about 35% of its value in less than a month, while the NASDAQ lost 30%. 

In the months immediately following, however, the market rebounded strongly, mainly due to the expansive monetary policies adopted by all the major central banks, which we will discuss in the next section. The price of Bitcoin, in the following 52 weeks, recorded +1,400%, or more than a x10. On the other hand, Ethereum rose by +1,500%, rising from $110 to $1,800, reaching its all-time high at $4,700 the following year. It was the same for the stock market, although the movements were much smaller in percentage terms. A year later, the S&P 500 and the NASDAQ almost doubled their value (+89% and +90%). Could we see the same scenario in the coming months?

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In short, the ‘Covid Crash’ was a launching pad that allowed all assets to restart strongly after their respective corrections, but what was the petrol that allowed the engines of finance to restart?

The response of the central banks

As mentioned in the introduction, the most exciting part is not the price movements of the main assets but what happened afterward, i.e., the central banks’ response to the situation. This is because the main issues that caused these violent corrections seem similar.

On 12 March 2020, the Governing Council of the ECB (European Central Bank) implemented a package of monetary policy measures aimed at “supporting liquidity and financing conditions for households, businesses and banks and helping to preserve the smooth supply of credit to the real economy”. Then, on 18 March, the European Union announced a massive Quantitative Easing measure, i.e. an unconventional policy action to increase the supply of money in circulation, the Pandemic Emergency Purchase Plan (PEPP). The PEPP injected some EUR 1,850 billion into buying public and private bonds from March to December. Adding this figure to those of the other measures, such as the Targeted Longer-Term Refinancing Operations (TLTRO) and the Asset Purchase Program, launched in September 2019 at the end of the Draghi era, brings the total to almost EUR 3 trillion mobilised by the ECB over three years.

On the other hand, the FED, to stimulate the economy and shelter itself from the risk of recession, immediately cut interest rates, a measure that the ECB could not implement given that European rates had already been zero since 2016. Then, the FED continued with Quantitative Easing policies. It is estimated that the FED injected more than $3 trillion into the economy in the immediate aftermath of the pandemic.

What can happen in the coming weeks?

Is the recent crypto and stock market crash a sign that what happened in 2020 could be repeated in the coming weeks? According to most economists, this is possible since the latest US employment data show that the economy is weakening and the risk of a recession is growing.

Leading macroeconomic experts expect an extraordinary meeting through which interest rates will be reduced, at least as far as the US ‘front’ is concerned. For example, Austan Goolsbee, president of the Chicago Federal Reserve, stated in an interview with CNBC that the Fed is ready to intervene if the US economy deteriorates. The first sign of this came with the latest unemployment figure, which was worse than expected (4.3% instead of 4.1%). Even Elon Musk commented on this, calling the US Central Bank ‘foolish’ for not yet cutting interest rates, as the ECB has already done.

However, the differences from the pandemic period must be noticed too, especially about the size of the crypto world and its degree of adoption. In 2020, the sector’s total value was 10% of today’s, and the world’s most significant investment funds had yet to join this market. 

In conclusion, the current macroeconomic scenario is similar to that of 2020. Can the conflict in the Middle East, the ‘recessionary danger’ caused by more than two years of severely restrictive policies, rising unemployment, and the crisis of technology companies compose a sufficiently strong motive to push global economies to reignite?


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Cryptocurrencies Under Pressure: Market Crash, Causes, and Prospects

bitcoin crash 2024

Bitcoin Crash: -18% in 24 hours – Here’s Why

The cryptocurrency market has been shaken by a significant drop in valuations, with Bitcoin and Ether recording impressive losses. This article will explore the reasons behind this sudden decline, the implications for investors, and the market prospects.

Let’s start by taking a closer look at the Bitcoin crash.

The Bitcoin Crash

On Monday, August 5, 2024, Bitcoin’s value dropped by over 18%, reaching around $51,100, a level it hadn’t touched in several months. Even more drastic was Ether’s fall, which lost 23%, bringing its value to around $2,200. This collapse has wiped out Ether’s entire annual performance.

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Behind the Bitcoin Crash: Panic in Traditional Markets

The drop in cryptocurrencies coincided with the dramatic collapse of Asian markets. The Bank of Japan’s decision to raise interest rates to the highest level in 16 years shook the markets. Panic began to spread at the end of the previous week, during the weekend of August 3 and 4, and peaked on the night between August 4 and 5. One indicator of this fear was a significant drop in the Nikkei index, one of Japan’s leading stock indices.

The Nikkei 225 closed with a loss of 12.4%, the worst session since “Black Monday” in 1987. The Topix followed the same fate, dropping by 12.23%.

Carry Trade and the Japanese Yen

One reason for this concern is related to an investment strategy called carry trade, which investors use to exploit low interest rates in Japan. Here’s how it works:

  1. Borrow at low cost: investors borrow money in Japan, where interest rates are meagre (almost zero).
  2. Convert and invest elsewhere: investors convert the borrowed money (in Japanese yen, JPY) into another currency, such as the US dollar (USD).
  3. Buy stocks: with these dollars, they buy stocks of technology companies in the US stock market, like those in the Nasdaq 100 (an index that includes large tech companies).

Effects of the Carry Trade

When many investors engage in this:

  • The yen depreciates: converting large amounts of yen into dollars causes the yen’s value to fall.
  • The Nasdaq rises: purchasing many American stocks causes their value to increase.

Current Problem

The Bank of Japan recently raised interest rates, increasing the yen’s value. When the yen’s value rises, investors who borrowed yen must repay more in other currencies, making carry trade less convenient. In recent days, many investors have abruptly stopped engaging in carry trade.

Result

  • Markets panic: By stopping the carry trade, investors sell the stocks they had bought (like those in the Nasdaq 100), causing their value to fall.
  • Nikkei Index drops: The sale of stocks and general uncertainty cause significant market drops, as seen in the Japanese Nikkei.

In summary, the market panic was caused by the end of an investment strategy (carry trade) that no longer works well due to changes in interest rates in Japan. This led to massive stock sales and significant market declines, affecting American stocks. Let’s now look at the impact in figures.

Impacts on US Markets

The first to suffer from the “panic-sell” were tech companies. Here’s how their valuations plummeted:

  • Apple: -6%
  • Meta: -10%
  • Microsoft: -12%
  • Amazon: -17%
  • Adobe: -18%
  • Nvidia: -20%
  • Broadcom: -23%
  • Tesla: -25%
  • Qualcomm: -30%
  • AMD: -37%

The Nasdaq dropped 3.4% last week, marking the worst three weeks since September 2022. Currently, futures indicate a further decline of the Nasdaq by 5%, with the S&P 500 and the Dow Jones down by 2.6% and 1.12%, respectively. The CBOE volatility index, often called the market fear gauge, rose by 58.7%, reaching its highest level since 2020.

Why Tech Companies?

We can outline three reasons:

  1. Warren Buffett, the famous American investor, has sold half his stake in Apple for $76 billion, causing a significant shake-up in the sector.
  2. Intel, one of the largest semiconductor companies, has announced a major personnel reduction, with the layoff of 15,000 employees.
  3. Many prominent American companies reported disappointing quarterly results, below analysts’ expectations. This caused a significant crash in the tech sector’s stock market. After mass layoffs post-pandemic, tech companies became very popular again due to the excitement for artificial intelligence (AI).

Problems with Artificial Intelligence (AI)

However, AI has not proven as reliable as hoped:

  • Profit doubts: experts and analysts from Goldman Sachs have raised doubts about AI’s ability to generate good profits compared to more traditional projects.
  • High costs: the enormous investments required to develop AI must yield the expected returns.

Market Effects

These issues have led to:

  • Stock sales: investors started selling tech company stocks.
  • Stock decline: even companies that met their targets saw a decrease in their stock value.
  • Disillusionment: there is growing disappointment among investors about AI’s promises.

The combination of disappointing financial results and concerns about AI’s profitability caused a wave of sales in the tech sector, increasing uncertainty in global financial markets.

In similar scenarios, fear has a chain reaction. It leads investors to get rid of higher-risk assets, like cryptocurrencies immediately. Let’s see the consequences of the last domino falling: the crypto market.

The Impact of the Crash In Figures

Total Cryptocurrency Market Capitalization (TCMC)

Since August 2, the cryptocurrency market capitalisation has collapsed by $510 billion in just three days. This collapse involved more investors than in the past, thanks to the approval of spot ETFs on Bitcoin and Ether, which attracted many institutional investors.

Market Crash and Leveraged Long Positions

The sudden crypto market crash wiped out over $600 million in leveraged long positions. According to TradingView data, on August 5, the BTC price dropped to around $49,000 before recovering to $52,900. ETH also experienced a significant drop, falling from $2,695 to $2,118 over the same period.

Impact on Ether Traders

In recent months, there has been a significant increase in open interest in Ether, with traders flocking to gain exposure to the asset ahead of the approval of Ether spot ETFs in the US. However, the sharp drop in cryptocurrencies hit hard, and traders seeking leveraged exposure to Ether, with over $256 million in long positions, liquidated.

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Expert Opinions

Josh Gilbert, a market analyst at eToro, stated that cryptocurrencies are often an indicator of investor sentiment. When investors panic or seek to reduce leverage, cryptocurrencies are often the first asset to suffer the consequences. However, Gilbert shared an optimistic outlook for cryptocurrencies in the coming months, suggesting that investors might see this situation as an opportunity.

The Economic Scenario

To comprehend this swift decline in the Bitcoin crash, it is crucial to broaden the perspective and examine the underlying beliefs rather than solely the reasons for the downfall. Let’s analyse the conducive environment that transformed uncertainty into widespread panic.

Are the United States Entering a Recession?

Recent economic indicators in the US and many analysts suggest the economy will enter a recession early next year. Recession fears negatively impact the markets, and market participants speculate on potential actions by the Federal Reserve.

Unemployment Data Is Not Positive

The monthly report from the US Department of Labor showed a growth of 114,000 jobs in July, well below the forecast of 185,000. The unemployment rate rose from 4.1% to 4.3%, the highest since October 2021. These harmful economic data create a growing sense of alert about a weakening job market and the economy’s susceptibility to recession.

Fed Interest Rates

For a year, the US Federal Reserve has kept the benchmark borrowing costs at a 23-year peak of 5.25%-5.50%. Some analysts fear that this prolonged restrictive monetary policy could push the economy towards a recession. The Sahm Rule recession indicator, which exceeded the 0.50 threshold, has historically signalled the early stages of a recession in the US economy.

While significant data are expected before the September 18 meeting, an acceleration in employment trends in August could strengthen the case for a 50-basis-point cut. However, currently, consensus leans towards a 25-basis-point reduction.

Expert Opinions

Simon White, a Bloomberg rate strategist, notes that the market might be prematurely anticipating a recession that is unlikely to occur before next year at the earliest. He adds that while the Sahm Rule triggers heightened recession concerns, it is often delayed and does not capture many stock downturns, making it neither a necessary nor sufficient condition for a recession.

Brian Jacobsen, chief economist at Annex Wealth Management, expressed concerns, stating that the Fed is on the verge of turning a victory into a loss. According to him, the economic momentum has slowed to the point that a rate cut in September might be insufficient and that a more substantial reduction than the typical quarter-point cut might be necessary to prevent a recession.

Trump’s Support for Bitcoin

Considering Donald Trump’s clear stance on Bitcoin, the upcoming US presidential elections could significantly impact the cryptocurrency market. During the recent Bitcoin Conference in Nashville, Trump compared Bitcoin to the steel industry a hundred years ago, arguing that blockchain has the potential to shape the future of the global economy.

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Democrats Gaining Ground

However, current polls show a recovery for Kamala Harris nationally and in three key electoral college states: Michigan, Wisconsin, and Pennsylvania. Although the margins are skinny and fall within the statistical error, especially in Pennsylvania, some models give the Vice President slightly better odds than Trump for the final victory. Just a few days ago, this scenario seemed highly unlikely.

From Certainty to Prospect

As a result, the situation that had helped push Bitcoin’s value so high has changed. Trump’s re-election now appears much less inevitable than two weeks ago, making a possible shift in cryptocurrency use in the United States only a prospect. This uncertainty adds to financial and international market concerns, with the Middle East teetering due to rising tensions between Israel and Iran. Unfavourable polls for Trump created the perfect scenario for a Bitcoin crash.

Future Prospects

The recent cryptocurrency market crash, especially the Bitcoin crash, has highlighted their vulnerability to macroeconomic events and political decisions. However, it is essential to remember that fundamental factors, such as the approval of ETFs and Bitcoin’s halving, have yet to show their full long-term impact. These events could potentially lead to a recovery and significant growth in the future.

Despite risk signals, it is essential to note that analysts have rarely successfully predicted a recession with accuracy. Economic forecasts are inherently uncertain and often subject to sudden changes. Moreover, during bull markets, the cryptocurrency market tends to decouple from the stock market, potentially offering different opportunities to investors.

In conclusion, while the cryptocurrency market is experiencing a difficult phase, its long-term prospects remain interesting. Investors need to maintain a long-term view and consider the risks and opportunities this dynamic market offers.

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Biden retires. What happens now?

Joe Biden retires. What happens now?

Biden has officially withdrawn from the US presidential election race. What happens now? What impact has the news had on the market?

This week started with a very important piece of news: Joe Biden, the current president of the United States, has announced that he will not run in the next US elections. According to him, he will “focus on finishing the current term as best he can.”

The diplomatic tones of the announcement are not enough to hide the truth. Joe Biden is retiring because of bad public appearances in recent years and strong pressure from the Democratic Party, which considers him no longer up to the electoral battle due to health problems. Read more in the article.

Biden resigns: Kamala Harris in his place?

“Biden launches Kamala Harris” headlined the New York Times after the news, also given the post on X (formerly Twitter) immediately following the withdrawal letter in which the president announced his full support for his deputy. The announcement came during the day yesterday, shortly after two o’clock in the afternoon, in American time (East Coast time).

It must be specified, however, that Biden did not resign as President of the United States, an action that would have made life much easier for Harris. Had it gone this way, the transition of the leading Dem in the US elections would have been much easier. The main problem with this is that Biden won the primaries and, therefore, there are delegates associated with his name who should have confirmed his nomination as the nominee at the Democratic convention in Chicago. As he did, Biden can only suggest, not dictate, that these vote for Kamala Harris. The fear of an ‘open’ convention, i.e., multiple candidates vying for the vote not of the voters but of the delegates indicated by the primaries in the past months, has been at the centre of much political analysis in recent weeks.

Predictably, after Biden’s announcement, the candidates’ odds of winning also changed. Before the announcement, the poll by Polymarket, the most popular decentralised prediction app, gave Trump a 71% win and Biden a 16% win. However, Donald Trump’s odds of winning have dropped to 64%, and Kamala Harris’s are at 30%.

Look at the graph of Bitcoin

The impact of the news on the markets

A short while ago, we witnessed the opening of the US stock market, which performed very well in the first few minutes of trading after Biden’s departure. The NASDAQ 100, the index that tracks the performance of the hundred most capitalised technology companies, recorded +1.56%, and the S&P 500, +1%. However, the impact of Biden’s withdrawal on Bitcoin was visible from the minutes immediately following the announcement. BTC returned above $68,000, if only for a few hours.

What will happen in the crypto world if Trump wins the November election? In recent months, the entrepreneur and former president has been increasingly pro-crypto. After several pro-BTC statements, the most important news concerns his presence at Bitcoin 2024, the world’s largest conference dedicated to the crypto world scheduled for 22-25 July in Nashville.

However, there is more; a Trump re-election could also cause an injection of liquidity in the ‘traditional’ markets, especially the stock market. His first term was already characterised by expansionary economic policies aimed at stimulating the economy, which could be applied again, given the recent slowdown in inflation. Will his very likely victory in the November 2024 elections signal the start of the most explosive bull run ever?


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ECB Rates: Impact of the Cut on Markets and the Economy

ecb rates

The ECB Cuts Rates for the First Time Since 2019

The European Central Bank (ECB) announced a rate cut on Thursday, 6 June, lowering the deposit rate from 4% to 3.75%, the benchmark rate from 4.50% to 4.25%, and the marginal lending rate from 4.75% to 4.50%. This hasn’t happened since 2019.

This decision was made despite inflation forecasts being revised upwards, indicating a slow and irregular path for rate reductions.

Future Interest Rate Decisions

Christine Lagarde, President of the ECB, emphasized that future rate decisions will be made “meeting by meeting” and warned of a bumpy path ahead. She added: “Today’s rate cut reflects the confidence we have in the growth path, but to continue this process, we must wait for analyses to confirm that we are in economic recovery.”

Despite the rate cut, the ECB provided no precise guidance on future moves, stressing that inflationary pressures remain high. Updated forecasts show average inflation of 2.5% for 2024, 2.2% for 2025, and 1.9% for 2026.

Impact on the Labour Market and Economy

The ECB revised its growth forecasts for 2024 upwards, now estimated at 0.9% compared to the 0.6% predicted in March. However, prospects for 2025 were slightly reduced to 1.4%, while those for 2026 remain unchanged at 1.6%. This scenario indicates moderate economic growth in the coming years, with inflation likely to stay above the 2% target until 2025.

Lagarde indicated that wage growth, although still high, is expected to slow down during the year, helping to reduce inflationary pressures. However, rate cuts are likely to slow, with inflation remaining above the ECB’s target for most of 2025. This implies that the ECB will closely monitor various economic indicators to determine future monetary policy.

Consequences of the ECB Rate Cut

The ECB’s rate cut will have several consequences:

  • Reduction in credit costs: Households and businesses will benefit from lower interest rates on loans, thus promoting access to credit and stimulating consumption and investment.
  • Impact on savers: Lower interest rates may penalise savers, reducing returns on bank deposits and government bonds.
  • Stimulus to economic growth: Lower borrowing costs should encourage spending and investment, supporting economic growth. However, the effectiveness of this measure will also depend on global economic conditions and domestic demand.
  • Inflation and wages: The rate cut could influence inflation and wage dynamics. Although Lagarde has signalled that wage growth will slow, inflation may remain high in the short term, further complicating the ECB’s future decisions.

Market Reactions

Financial markets had anticipated the rate cut, pricing in a 25 basis point downward move. Following the rate cut announcement, eurozone government bond yields rose significantly. In particular, the 10-year German bond yield increased by nearly 8 basis points to 2.573%, while the 2-year bond yield rose by just under 6 basis points to 3.033%. Yields on Italian and Spanish 10-year government bonds also rose by 9 and 7 basis points, respectively, to 3.893% and 3.299%.

International Comparison

Despite starting to raise rates later than other central banks, the ECB is now leading with the June cut. The US Federal Reserve, for instance, is still grappling with higher inflation. Other countries like Canada, Sweden, and Switzerland have already started to reduce interest rates in the current cycle.

The ECB has clarified that future moves will depend on economic data and that there is no predetermined path for further rate cuts. With inflation still above target and moderate economic growth, the future of European monetary policy remains uncertain, requiring constant attention and careful assessment of all variables at play.

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FED: Interest Rate Predictions for the June 2024 Meeting

FED

What is the FED’s stance on cutting interest rates? Here are analysts’ predictions.

The Federal Reserve (FED) is the central bank of the United States and plays a crucial role in the global financial system. Economists, analysts, and investors worldwide closely monitor every decision it makes, especially regarding interest rates.

But what can we expect from the upcoming FED meeting scheduled for 11-12 June 2024? Analysts predict that the FED will keep interest rates unchanged, but some signals could anticipate future cuts by the end of the year.

What is the FED, and why is it important?

The Federal Reserve, or FED, is the institution that serves as the central bank of the United States. Its role is to stabilise the economy through the management of money and interest rates. Its main functions are controlling inflation, regulating the banking system, and promoting economic stability. The interest rates set by the FED influence the cost of money, i.e., how much it costs to borrow or how much you earn by saving.

The current interest rate situation

FED interest rates have been steady between 5.25% and 5.5% since July 2023. After a year of stability, the FED decided not to increase rates further despite mixed signals on inflation. According to FED Governor Christopher Waller, some inflation reports in the early months of 2024 temporarily cooled expectations of a rate cut. Still, recent consumer price index (CPI) data suggest that inflation is not accelerating.

Analysts’ predictions for the FED June meeting

According to the CME’s FedWatch Tool, the probability of a rate cut at the June meeting is just 0.1%. The forecasting site Kalshi also indicates a 99% probability that rates will remain unchanged. However, analysts predict the FED might signal potential rate cuts later in 2024. During the meeting, the “Summary of Economic Projections” will be updated, where monetary policymakers will outline their forecasts for the end of the year.

Impacts on everyday life

The FED’s decisions on interest rates have a direct impact on people’s daily lives. Higher interest rates mean more expensive loans for homes, cars, and businesses and higher returns for savers. Conversely, lower rates make loans cheaper but reduce earnings on savings. For example, 30-year mortgage rates reached an annual high of 7.79% in 2023, then fell to 7.03% by the end of May 2024.

When might a rate cut occur?

According to bond markets, the first rate cut could happen in September 2024, with a 50% probability. A second cut might follow in December. However, these predictions are subject to rapid changes in response to economic data. For example, there is still a 15% probability that there will be no cuts in 2024.

The June FED meeting is highly anticipated, but it is unlikely to bring immediate changes in interest rates. All eyes are on the updated economic projections and the statements from FED Chairman Jerome Powell. The possibility of rate cuts during 2024 will depend on the strength of the labour market and progress in controlling inflation.

The FED’s decisions will continue to have a significant impact on the global economy and the daily lives of millions of people. Monitoring these decisions helps us better understand economic dynamics and make more informed financial decisions.

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US FOMC: no rate cut in April. How did the market react?

April and May 2024 FED meeting: forecasts, news and decisions

The FED and its president, Jerome Powell, have decided that interest rates will remain unchanged. When will we see the first cut?

The situation on interest rates has changed dramatically compared to last month. Chairman Jerome Powell announced the Federal Reserve’s (FED) decision of 1 May 2024, which ruled out a rate hike in the coming months. 

This statement denotes a change of course on the part of the US central bank, as its president had announced his intention to make at least three rate cuts during 2024 in past meetings.

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The Fed’s decision

The FOMC (Federal Open Market Committee) meeting on 1 May ended like the four previous ones, i.e. with nothing. The Federal Reserve decided not to change interest rates, which remain fixed in the range of 5.25% to 5.5%. What weighed on the decision, which was taken by a unanimous vote of all meeting participants, was mainly inflation. According to the latest Consumer Price Index (CPI) data, published on 10 April 2024, inflation in the US stands at 3.5%, still well above the 2% target.

In short, the current scenario is very different from the one assumed at the beginning of 2024. At that time, experts predicted six or seven downward adjustments in interest rates, in the grip of the wave of optimism that had swept through the investment sector. In March, then, after revising expectations, Powell announced his intention to make at least three cuts during 2024 starting in June.

The labour market also falters

In April, the US labour market was also less buoyant than in previous months. According to the report released in early May, the unemployment rate rose and new jobs were fewer than analysts had expected.

The ‘Nonfarm Payrolls‘ figure, i.e. payrolls excluding the agricultural sector, returned +175,000 instead of the +240,000 expected, while the unemployment rate rose from 3.8% to 3.9%. These figures are particularly harmful compared to those of March (around 300,000 new jobs and the unemployment rate at 3.8%), reflecting the market’s optimism.

The reaction of the markets

Although, in theory, the postponement of the interest rate cut should not be exactly positive news for the markets, the major US indices reacted well to the FOMC decision.

On the same day, the S&P 500, the index tracking the performance of the five hundred most capitalised American companies, lost about 1.5%, only to recover in the following days. It is currently in the 5,185 area, thanks to a bullish movement that started the day after the meeting of about +3.5%. The NASDAQ and the Dow Jones also performed well over the past week. They rose by 4.7% and 3% respectively. 

In recent months, the performance of the US stock market seems increasingly decoupled from the country’s monetary policy. The leading indices are close to all-time highs and do not suffer from the periodic postponement of interest rate cuts.

What will the Federal Reserve decide in the coming months? The central bank’s main objectives remain the same as in March: to control inflation and promote employment, although the situation has worsened compared to two months ago. Will inflation go back down, and will this allow the US central bank to proceed with the first, long-awaited interest rate cut? Or will the FOMC and Jerome Powell change their minds again, and the cost of money remains unchanged throughout 2024? 

If we were to see the first scenario, interest in the crypto sector could also grow as government bond yields decrease. You can prepare for this possible scenario by buying Bitcoin on our app!

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Public debt: which are the seven most indebted countries in the world?

public dept ranking countries

Which countries have the highest public debt? Find out the ranking and where your country ranks.

Public debt is one parameter that describes a country’s economic situation. We hear it mentioned everywhere, often in relation to another measure, GDP, which indicates the total productive assets of a state.

Since we are in a capitalist system, the entire global economy is based on debt. It is a kind of sap, indispensable to achieving the main objective imposed by the economic system in which we live: growth. In 2008, however, a technology was born that has the potential to revolutionise the global monetary system. We are talking about Bitcoin; you can read more about it below.

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However, let us return to the central theme of this article: Which are the most indebted states in the world, and thus, which is the ranking of the countries with the highest public debt? 

Public debt: a problem to be tackled

The ranking of countries by public debt has changed since the COVID-19 pandemic, not so much by the order of the states in the ranking but by the amount of money they owe their creditors. In 2028, according to the International Monetary Fund (IMF), the global debt/GDP ratio will reach 100%. 

This indicator, usually used to analyse an individual state’s economic situation, measures the amount of debt in relation to the Gross Domestic Product (GDP), i.e., the total productive assets of a state, over a year.

If the low ratio, GDP is sufficient to repay the annual debt. If, on the other hand, the ratio represents a large gap between debt and GDP, it will mean that production is not enough to repay the debts, and more will have to be demanded, increasing the ratio even further.

The situation is even more serious if we consider the quantitative tightening policies that all major Western governments have implemented since 2022 to combat inflation. Rising interest rates contribute to increasing government debt costs. In other words, the world is sitting on a mountain of debt; global public debt exceeded the worrying $300 trillion mark in March 2024. 

In short, the situation is becoming increasingly critical. Jerome Powell, chairman of the Federal Reserve (the central bank of the United States), recently said that America ‘has embarked on an unsustainable path’ and is ‘borrowing money from future generations’. Could Bitcoin be the protagonist of the next monetary revolution?

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Despite the above and a total public debt of about 34 trillion dollars, the US does not lead the ranking of countries with the highest public debt. Read on for the ranking!

The ranking of the most indebted countries

The ranking of the countries with the highest public debt is compiled using the debt-to-GDP ratio. The nominal value of this measure taken ‘alone’ does not provide information on the real incidence of a state’s debts.

  1. Japan (264%)

Japan has the highest debt-to-GDP ratio. The cause of this debt is the housing bubble that burst in the 1990s.

  1. Venezuela (241%)

Venezuela’s devastating economic, political, and social crisis, which erupted during the second half of the last decade, is still not over, and its third-place ranking in the ranking of countries with the highest public debt testifies to this. According to estimates, some 8 million people have recently left the country due to its very serious conditions.

  1. Sudan (186%)

Third in the ranking of countries in terms of public debt is Sudan, which has been severely affected by an economic crisis caused by internal conflicts. This has resulted in policies of international isolation negatively influenced by corruption.

  1. Greece (173%)

Greece’s avoided default in 2009 is now a distant memory; the country has certainly improved in recent years. In the second quarter of 2023, it was the second fastest-growing country in Europe.

  1. Singapore (168%)

Singapore is an incredibly advanced city-state, especially economically, and boasts one of the highest per capita incomes in the world. Despite having a high public debt, rating agencies continue to rate it with top marks.

  1. Eritrea (164%)

Eritrea is a dictatorship headed by unelected President Isaias Afewerki. In the African state, the authoritarian government has implemented laws that severely restrict civil and political rights. In addition, it imposes long-term compulsory military and civil service, which forces many citizens to flee.

  1. Lebanon (151%)

Lebanon’s economic crisis has been going on for four years. From 2019 onwards, the country’s public debt has grown enormously, reaching 282% of GDP in 2022. In addition, the Lebanese lira is undergoing a major devaluation, currently taking almost 90,000 to reach the value of one US dollar.

  1. Italy (142%)

Our country ranks fifth among the most indebted countries. Italy’s public debt reached a new all-time high in February 2023 and, after falling slightly in August, has been rising again since September.

  1. USA (129%)

The United States is ninth in the ranking of the most indebted countries. Like Italy, it has pursued quantitative tightening policies to combat inflation. One of the weak points of this type of measure concerns debt. As interest rates rise, so do the states’ liabilities.
Now that you know the ranking of the most indebted countries, you can delve deeper by reading our dedicated Academy article. This starts with a simple definition and then deals with the history of Italy’s public debt.

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What is MiCA and what does the European regulation mean for crypto?

micar regulation explained

What is MiCAR, and what is the Eurozone market’s crypto regulation? Read the complete guide.

What is the MiCAR regulation, and what does it provide for? A more than legitimate question after the European Parliament approved in June 2023 the document that will regulate the cryptocurrency market in the Eurozone, published in the Official Journal of the European Union, and which will gradually come into effect during 2024.

This document is known by the acronym MiCAR or MiCA, which stands for Markets in Crypto-Assets and is the first EU regulation governing the cryptocurrency sector.

This regulation package aims to ensure investor protection through transparency obligations, requirements to operate, and prevention of abuse and to bring systemic order to the crypto asset sector. 

Let’s see what it establishes and how it changes the crypto landscape. 

From ICOs to MiCAR

The regulation of MiCAR was inspired by the phenomenon of crypto public offerings activities in 2017, better known as Initial Coin Offerings (ICOs). These have particularly attracted the attention of national and European lawmakers and regulators. 

The announcement in 2019 of the development of Libra, Facebook’s stablecoin, prompted states to approve regulation on this type of cryptocurrency quickly. Libra would have allowed the transfer of a private currency to billions of users within the closed circuit of the blockchain. 

The opportunities provided by MiCAR

The basic idea is that crypto assets have the potential to become efficient means of raising capital for small and medium-sized enterprises and, due to their inherently transnational nature, to offer themselves as instruments for new payment services while maintaining the European Union as a pole of 

Ensuring a unified regulatory framework would lead Europe to strengthen its industrial and innovation capacity within safe and ethical limits. Indeed, this Euro-unified regulation is unique worldwide and can turn Europe into the first ‘continental’ single market for new assets, securing it a leading position vis-à-vis other jurisdictions, including the United States. 

The current regulatory environment of cryptocurrencies

The European regulatory situation on crypto is highly fragmented and evolving. Each country has adopted its laws, making regulatory harmonisation difficult. France, for instance, has regulations for ICOs (Initial Coin Offerings), whereas Germany classified crypto as a digital currency and subjected it to specific taxation some time ago. Italy has also introduced the taxation of cryptocurrencies within the Budget Law for 2023.

The starting point: what is a cryptocurrency?

The EU’s first attempt was to search for a term and definition encompassing most types of cryptocurrencies and related activities. 

Hence, the term ‘crypto-asset’, defined as ”’a digital representation of a value or right that can be transferred and stored electronically, using a distributed ledger or similar technology”, was introduced.  

MiCAR: what it provides for crypto projects

The MiCAR addresses both crypto-asset issuers and crypto-asset service providers (CASPs). 

From now on, crypto-asset issuers can operate with prior authorisation. They must comply with various requirements, including transparency requirements and publishing a “white paper” detailing the rights and risks associated with the issued asset. Specific categories of crypto-assets must also comply with specific reserve, governance and price stabilisation requirements.

The whitepaper will thus provide transparency on aspects such as system architecture, security mechanisms, governance strategies and the intended use of the technology, thus facilitating investors’ understanding of the project. 

Additionally, CASPs (Crypto-Asset Service Providers) will need to register with national authorities and adhere to strict standards to protect their users.

MiCAR: what it provides for exchanges

The MiCAR stipulates that all companies providing crypto-asset-related services, such as custody, exchange, advisory, and others, must register with national regulators and adhere to strict organisational, operational, and business conduct standards. These standards include protecting clients’ assets, preventing conflicts of interest, and ensuring market transparency. The new framework also holds CASPs directly liable in case of bugs, exploits or insolvency. This will ensure that users are compensated if part of the platforms’ capital is lost. Furthermore, CASPs must keep a history of all transactions processed on their platform for at least five years.

MiCA: Combating Money Laundering Regarding anti-money laundering, the monitoring and enforcement of current regulations will be entrusted to the EBA (European Banking Authority). The entity will also maintain a register of companies that will be prohibited from engaging in CASP activities in the EU, which it will use to restrict the entry of organisations considered to be at “high risk” of money laundering into the market. Additionally, all companies dealing with Proof-of-Work crypto-assets must regularly submit documents attesting to their environmental impact. MiCA does not ban PoW cryptocurrencies but limits their spread by cutting public incentives directed towards this type of technology.

Crypto-assets as Financial Instruments While issuers must comply with MiCA directives concerning all crypto-assets that are not considered financial instruments, service providers must apply them regardless of the nature, value, or right that the crypto-asset incorporates.

The distinction between crypto-assets that can be considered financial instruments and those that cannot is a fundamental component of the entire regulatory framework. MiCA seeks to address all use cases of crypto-assets that were not previously covered by historical regulations, such as MiFID, which regulates crypto-assets akin to financial instruments, and PSD for those akin to electronic money and deposits.

Drawing on the principles of existing regulations, MiCA represents a new and complementary regulatory body which seeks to adapt to the peculiarities of the crypto sector.

New Legal Categorisation of Crypto-assets The first step was defining three categories of crypto-assets that, as mentioned, are not akin to financial instruments:

  • Electronic Money Tokens (EMT)
  • Asset-Referenced Tokens (ART)
  • “Residual” Tokens

The classification of tokens is still evolving and will, therefore, require further clarification from the relevant Authorities.

Let’s see the definitions of the three categories of tokens.

E-money tokens

Electronic money tokens (indicated by the acronym EMT) include all those tokens that refer to the value of a single legal tender fiat currency, such as the euro or the dollar. The difference with ‘asset-linked tokens’ is right here: they link to the value of a single fiat currency.  

This category would include many stablecoins, such as Tether, cryptocurrencies designed to maintain a stable value through a ‘pegging’ system to a trusted currency in a 1:1 ratio. The anchoring, whereby, for example, one unit of stablecoin always corresponds to 1 dollar, is ensured through currency reserves or algorithms. 

With the MiCAR, issuers and EMT providers will mainly have to comply with these obligations:

  • The European Banking Authority (EBA) will supervise and regulate all EMTs.
  • EMT issuers will need an ‘e-money licence’, similar to a standard bank licence, but with strict limits that do not imply the possibility to operate as a credit institution.   

Asset-referenced tokens

The second category, asset-referenced tokens (denoted by the abbreviation ART), include those tokens that are not EMTs and “aim to stabilise their value by reference to another value or right, or a combination thereof, including one or more official currencies.”

An example is Pax Gold, whose acronym is PAXG, an attempt to combine the advantages of gold and blockchain. This stablecoin reproduces 1:1 the value of gold, the precious metal of which its reserves are also composed. Pax Gold is issued by Paxos Trust Company. Thanks to this stablecoin on the blockchain, even small and fractional amounts of gold can be purchased.

With the MiCA, issuers and providers of ART will be subject to additional obligations, such as:

  • Unless deemed ‘significant’, all ARTs will be supervised by the European Securities and Markets Authority (ESMA). They are significant when they exceed certain thresholds, such as a market capitalisation of more than 5 billion. In this case, the EBA will take over. 
  • Only token issuers with a registered office in the EU can issue ARTs.  
  • ARTs not pegged to a European currency will be controlled to preserve the EU’s monetary integrity.   

The interpretive debate on EMT and ART

The debate on the definition of ART is particularly heated. It seems to extend to all stablecoins, thus constituting a broad set that includes the more specific one of EMT. However, for some, the interests and rights associated with ART are not easily compatible with those of EMT. 

Regardless of first impressions, it is clear that these definitions remain too limited to cover the various facets of stablecoins fully. A regulation that truly reflects the sector’s technological and legal characteristics will require true collaboration between the cryptocurrency world and the regulatory authorities, not a cramped ‘copy cut’ of the old regulations for the crypto market.

Residual tokens

The third category, the ‘neither meat nor fish’ category, includes all ‘residual’ tokens. This general category also includes utility tokens and all crypto-assets that do not qualify as ART or EMT—that is, those that do not peg their value to a fiat currency or basket of assets. 

Utility tokens provide digital access to a specific product or service. The MiCAR rules require transparency here but are less restrictive than those for EMTs and ARTs.

Companies issuing this type of token must create a White Paper, which must be published on the website of the organisation issuing the cryptocurrency.

This document should contain all fundamental information about the token, such as a detailed project description, how crypto is issued and sold, and the technologies on which it is based.

The case of Bitcoin

Although bitcoin (BTC) falls under ‘residual tokens’ in terms of categorisation, the exclusion from the Regulation is clarified in the Considerando. Here, it is said that the rule does not apply when a crypto asset is automatically created as a reward for blockchain maintenance or transaction validation. 

This regulatory approach demonstrates the choice to exclude blockchain technology’s most innovative and dynamic aspects. The division into three categories, while including a residual open category, excludes many crypto assets, effectively ignoring Bitcoin.

It is almost as if placing it in limbo, neither currency nor financial instrument, is the best way to make it as harmless as possible. This is if it is true that every good or bad law ends up being perceived positively because its mere existence can incentivise investment and a certain trust in the entire ecosystem. 

The fact remains that we continue to ignore the elephant in the room. Bitcoin is the most popular crypto asset by far, the number one by market capitalisation, with a dominance (Bitcoin’s valuation relative to the overall cryptocurrency market valuation) of over 50%. In addition, almost all of the market players for which MiCAR is intended offer related services. Bitcoin is unique in its decentralised governance characteristics, against which the regulator’s ambitions of control continue to clash without finding a solution. 

DeFi, the great absentee 

DeFi is also outside the MiCAR framework.

DeFi is an issue, changing every criterion for imputing liability in decentralisation. Therefore, it is putting regulators worldwide in a quandary, uncertain how and whether creating an ad hoc rule makes sense.

It is also surprising that credit markets in crypto assets have been excluded from regulation, considering their reputation as one of the most risky areas for consumers, especially regarding the relationship between service providers and consumers. 

MiCAR focuses on the risks associated with centralised platforms, whereas lending and staking crypto assets are more common on decentralised platforms. Although these activities often imply a certain centralisation of processes, raising doubts about whether decentralisation is truly decentralised and whether responsible parties can be identified, this does not seem to lead to a balanced supervisory framework.

NFTs are also missing

The exclusion of NFTs (Non-Fungible Tokens) from regulation is based on their distinctive characteristics. Unlike other crypto-assets, NFTs are unique and not easily interchangeable, which makes it difficult to determine their value through direct comparisons with other markets or equivalent assets. 

Their uniqueness significantly reduces their use in the financial sector and the associated risks for the financial and monetary system (fiat). Consequently, the legislator decided to exclude them from the scope of certain regulations. 

This does not imply that NFTs cannot be classified as financial instruments in the future. The discussion on NFTs is ongoing, and further guidelines on their classification and regulation may emerge.

Exchange wallets and private wallets: what changes with MiCAR?

Also, European laws aim to protect users when regulating crypto wallets. P2P payments between private individuals via cryptocurrencies have not been affected.

Finally, MiCAR also deals with the impact of crypto influencers, those who express personal opinions on certain cryptocurrencies by recommending them to their followers on social networks. The bill penalises those who do not behave transparently, expressing opinions on a particular asset without disclosing their exposure.

Industry opinion: pro-MiCAR

Crypto enthusiasts have known about the MiCAR and its provisions for several months. In fact, the first draft of the document was drafted in 2020, so they have had plenty of time to understand this regulation. 

According to some experts, MiCAR is positively impacting the industry. The new framework’s consumer protection makes the crypto world more accessible. In addition, the new rules prevent suspicious or questionable companies from entering the European market, reducing the risk of scams or rug pulls. According to Dante Disparte, Circle’s Head of Global Policy, the laws will transform the European Union into a competitive and innovative crypto terrain.

Looking at the confusing and penalising regulatory situation in the US, MiCAR has become an example of how clear rules can attract developers and new projects. In Europe, investments in crypto projects are becoming the most numerous in the world.

Industry opinion: against MiCAR

On the other hand, critics think these new European laws could negatively affect the market. This is mainly because some transactions that, as of today, are carried out immediately, such as transactions between exchange wallets and withdrawals of large amounts of crypto, could become complicated. Critics, therefore, believe this will slow the adoption of cryptocurrencies.

In general, however, the opinions of members of the crypto community who have long known what MiCAR regulation is and what it provides are positive. After all, most of the pioneers in the field (such as Charles Hoskinson and Andre Cronje) have always favoured cryptocurrency regulation.  

You are on the blog of Young Platform, the Italian platform for buying cryptocurrencies. Here you can find the latest news on blockchain, Bitcoin and Web3. We look closer at this emerging economy with an eye on traditional finance so you have everything you need to enter the new age of money.