Posted on

What is the Poorest Country in the World? Ranking of the Poorest Countries in 2024

The Poorest Countries in the World: Updated Ranking

Discover the ranking of the poorest countries in the world for 2024 based on GDP per capita. Explore the challenges and conditions these nations face.

One of the most common metrics used to examine the poorest countries in the world is GDP (Gross Domestic Product) per capita. This figure represents the average economic output per person in a given country and is a crucial indicator of financial health. 

A low GDP per capita often correlates with challenging living conditions characterised by fragile economies, high unemployment rates, and inadequate infrastructure. Moreover, these nations frequently grapple with internal conflicts and political instability, further hindering their development.

However, GDP per capita alone does not fully capture the economic well-being of a country’s citizens, as it overlooks disparities in the cost of living. GDP,  combined with issues such as low education levels, endemic diseases, and limited access to healthcare, these factors create environments where economic development is nearly impossible, leading to harsh living conditions. Below, we delve into the poorest countries in the world as of 2024 and the primary issues they face.

You might be interested in The Richest Countries in the World

The poorest countries in the world: 2024 ranking

Per stimare quali sono i paesi più poveri del mondo di solito ci si basa sui dati forniti dal Fondo Monetario Internazionale (FMI).

Nella maggior parte degli stati che trovi in questo articolo è molto difficile accedere ai servizi finanziari, anche a quelli standard come l’apertura di un conto bancario. Per questo motivo sono sempre di più i cittadini che si affidano a Bitcoin o ad altre criptovalute. Questa tecnologia coincide con un modo nuovo, e per molti l’unico, di gestire il proprio denaro e salutare per sempre lo status di unbanked. Se ti interessa questo tema e vuoi saperne di più puoi scaricare la nostra app.

The following ranking of the poorest countries is based on data from the International Monetary Fund (IMF). In many of these countries, access to essential financial services is minimal, with many citizens turning to cryptocurrencies like Bitcoin as a new way to manage their money, often as their only viable option.

This technology represents a new, and for many, the only way to manage their money and say goodbye to being unbanked. Suppose you’re interested in the opportunities cryptocurrencies offer as cross-border funds independent of governments or banks. In that case, you can buy, sell, and send cryptocurrencies on Young Platform, a leading European platform.

Sign up for free at Young Platform

1. Sudan del Sud

GDP per Capita: ~$450

South Sudan, the world’s poorest country, gained independence in 2011 but has been plagued by civil conflicts that have hindered economic and social development. Despite its vast oil reserves, South Sudan suffers from the “resource curse,” where wealth in natural resources leads to corruption, division, and conflict instead of prosperity.

2. Burundi

GDP per Capita: ~$900

Unlike South Sudan, Burundi lacks significant natural resources. The civil war that ended in 2005 left the country in dire straits, with most of its population dependent on subsistence agriculture. Less than 5% of the population has access to electricity, and inflation (an average of 14%, but it touched 30% in 2023) remains a significant issue, contributing to the erosion of living standards.

3. Central African Republic (CAR)

GDP per Capita: ~$500

The CAR is rich in natural resources like gold, oil, uranium, and diamonds, yet its people remain among the poorest globally. Since its first democratic election in 2016, the country has seen some growth, driven by timber, agriculture, and the diamond trade. However, much of the nation remains under the control of armed groups, hindering development. Growth in recent years has shown a moderate recovery, driven by the lumber industry, recovery in the agricultural sector, and partial recovery in the diamond trade.

4. Democratic Republic of Congo (DRC) 

GDP per Capita: ~$1,500

Since gaining independence from Belgium in 1960, the DRC has experienced political instability and violence. Despite its vast mineral wealth and potential to become one of Africa’s wealthiest countries, about 65% of the population lives on less than $2.15 a day. The country has a population of 100 million, with the average per capita income hovering around $1,500 annually. However, according to the World Bank, the DRC has the resources and potential to become one of Africa’s richest countries and a growth engine for the entire continent. It is currently the world’s largest producer of cobalt and the leading copper exporter in Africa, two essential elements for the electric vehicle market.

5. Mozambique

GDP per Capita: ~$1,200

While rich in resources and strategically located, Mozambique continues to face poverty due to political instability and adverse climatic conditions. Despite these challenges, the IMF projects strong economic growth driven by the energy sector. To make matters worse, the gas-rich northern part of the country has been hit by attacks by Islamic insurgent groups since 2017. Despite this, according to the IMF, the economy remains booming: it is projected to grow by 5% in 2024 and 2025, with prospects for double-digit growth in the second half of the 2020s.

6. Niger

GDP per Capita: ~$500

Niger is heavily threatened by desertification, with 80% of its territory covered by the Sahara Desert. The rapid population growth outpaces agricultural production, worsening food insecurity. Additionally, ongoing conflicts with Boko Haram exacerbate the nation’s instability.

In 2021, with the election of the new president Mohamed Bazoum, a former teacher and interior minister, Niger experienced its first democratic transition of power and seemed poised for significant change. However, in the summer of 2023, Bazoum was captured by some members of his presidential guard, and since then, a military junta has ruled the country.

7. Malawi

GDP per Capita: ~$600

Malawi is seventh on the list of the poorest countries in the world. Its economy, heavily dependent on agriculture, is vulnerable to climate change and food insecurity. The government faces a severe economic crisis marked by fuel shortages, rising food prices, and currency devaluation.

8. Liberia

GDP per Capita: ~$600

Liberia, Africa’s oldest republic, has been among the world’s poorest nations for years. However, Joseph Boakai’s election in 2023 offers some hope for economic recovery, with growth projected to reach 5.3% in 2024.

9. Madagascar

GDP per Capita: ~$450

Since gaining independence from France in 1960, Madagascar has experienced political instability, contested elections, and slow economic growth. Despite high poverty rates and an inflation rate of nearly 8%, the current government under Andry Rajoelina, reelected in 2023, continues to struggle with widespread poverty.

How limited mobility hinders economic growth in Africa’s poorest countries

Limited mobility has a profound impact on economic growth, particularly for African countries that already struggle with poverty. According to research by Prof. Mehari Taddele Maru, African nations top the list of Schengen visa rejections, with around 30% of African applicants being denied compared to just 10% worldwide. 

This stark disparity highlights how restricted access to international travel further marginalizes the poorest countries, making it harder for individuals to seek better opportunities, engage in global trade, or even gain exposure to new skills and ideas. 

The high rejection rates are particularly pronounced in the poorest African countries, creating a vicious cycle where limited mobility exacerbates economic stagnation. With the ability to move freely, these nations can overcome significant barriers to growth, as their citizens can participate in the global economy, seek education abroad, or build international business connections.

You might be interested in The Most Powerful Passport: 2024 Global Rankings.

Conclusion

The ranking of the poorest countries in the world highlights the severe economic challenges many nations face. However, despite these difficulties, there is potential for future growth in these countries, with natural and human resources that, if properly harnessed, could significantly improve living conditions. Stay tuned for more insights if you’re interested in learning more about these countries’ global economic challenges and development efforts.

Posted on

The Most Powerful Passport: 2024 Global Rankings

most powerful passport 2024

What does it mean to have the most powerful passport in the world?

In 2024, the title of “most powerful passport” is more than just a badge of honour—it’s a gateway to unparalleled freedom and opportunities. But what exactly makes a passport powerful? In this deep dive, we’ll explore the concept of passport power, the global rankings for 2024, and what it means for citizens who hold these prestigious documents.

What is a “powerful” passport?

Imagine travelling freely, crossing borders without hassle, and exploring new cultures without facing bureaucratic obstacles. This is the privilege of having the “most powerful passport in the world.” A powerful passport allows entry into many countries without a visa or with a visa on arrival, granting its holders tremendous freedom of movement.

Advantages and Privileges

Holding a powerful passport comes with several key benefits:

  • Freedom of movement: Travel to numerous countries without needing a visa.
  • Economic opportunities: Easier access to global markets and the ability to relocate for work.
  • Quality of life: The ability to choose from various destinations for living, studying, or working, enhancing overall quality of life.

How the ranking of the most powerful passports changes

The ranking of the most powerful passports in the world is constantly evolving. Changes can be driven by various factors, including:

  • Geopolitics: Tensions or agreements between countries can influence the number of visa-free destinations.
  • International Agreements: New treaties or partnerships can alter entry conditions for citizens of certain nations.
  • Global Crises: Events like the COVID-19 pandemic have significantly impacted global travel possibilities.

Measuring the most powerful passport in the world

Each year, several organisations publish rankings of the most powerful passports based on the freedom of travel they offer. Among the most influential is the Henley Passport Index, which evaluates passports based on the number of countries their holders can visit without a visa.

This ranking compares 199 passports against 227 possible destinations. A passport’s “score” depends on the number of visa-free countries it grants access to, with data from the International Air Transport Association (IATA).

The most powerful passports in the world: 2024 rankings

  1. The new number one: Singapore

In 2024, Singapore has claimed the top spot, surpassing other countries that usually compete for the number one position. Singaporean citizens can now travel to 195 countries visa-free, setting a new record. This achievement cements Singapore’s position as a global leader, thanks to its strong diplomatic relations and economic stability.

As we will explore further, the freedom of movement for individuals is closely linked to capital mobility and, consequently, to a country’s wealth. It is no surprise, then, that Singapore is one of the world’s most “crypto-friendly” countries. Singapore has been striving to establish a regulatory balance for cryptocurrencies and attract the industry within its borders for some time. If you’re interested in following the crypto market, you might want to consider using this:

Exchange Young Platform
  1. Second Place: Europe and Japan

While Singapore has taken the lead, many European and Asian countries share second place, with visa-free access to 192 destinations. France, Germany, Italy, Japan, and Spain are among these countries, highlighting the importance of stability and diplomatic relations in securing travel freedom.

  1. Third Place: a European and Asia dominance

In third place, we find an unprecedented group of seven countries, each with access to 191 visa-free destinations. These include Austria, Finland, Ireland, Luxembourg, the Netherlands, South Korea, and Sweden, emphasising the continued dominance of Europe and Asia in the global passport rankings.

  1. United Kingdom and United States: former powers in decline

The United Kingdom clings to 4th place, sharing the rank with Belgium, Denmark, New Zealand, Norway, and Switzerland, scoring 190 destinations. Although slightly lower than previous years, it remains a significant position. The United States continues to slide in the rankings, landing in 8th place with access to 186 countries visa-free. Both the UK and the US, which held the top spot in 2014, have seen a decline in their passport power over the past decade, reflecting a gradual loss of political and diplomatic influence.

The world’s weakest passports

At the opposite end of the spectrum, Afghanistan remains at the bottom of the list, ranking 199th as the weakest passport in the world. Over the past six months, the Afghan passport has lost access to another destination, leaving its citizens visa-free entry to only 26 countries—the lowest score ever recorded in the index’s history.

The biggest climbers and fallers in the rankings

United Arab Emirates: A Remarkable Ascent

One of the biggest success stories in 2024 is the United Arab Emirates (UAE), which has entered the Top 10 for the first time. The UAE has added 152 destinations since 2006, achieving a score of 185. This leap from 62nd to 9th place results from a targeted government strategy to make the UAE a global hub for business, tourism, and investment.

China and Ukraine: rapid climbers

China and Ukraine have made significant strides in the rankings over the past decade. Since 2014, China has climbed 24 positions, from 83rd to 59th, and Ukraine has moved from 53rd to 30th. Both countries allow their citizens visa-free travel to 148 countries. This improvement reflects the political and economic changes in these countries.

The most significant loser: Venezuela

Venezuela has seen the most significant drop, falling 17 positions from 25th to 42nd place over the past decade. This decline is due to severe economic and political crises, which have forced over seven million Venezuelans to leave. Yemen, Nigeria, and Syria have also seen significant losses, dropping 15, 13, and 13 positions, respectively, due to conflicts and instability that limit their citizens’ mobility.

The Impact of Travel Freedom on Economic Prosperity

In 2024, freedom to travel has become a crucial indicator of economic prosperity. According to the Henley Global Mobility Report, the ability to travel visa-free or to relocate businesses to favourable cities has become a key factor in wealth and international legacy. Passport rankings also connect with the rankings of the world’s richest and poorest countries.

Fastest-growing cities for millionaires

Among the fastest-growing cities for millionaires, Shenzhen and Hangzhou in China have seen impressive growth, with 140% and 125% increases, respectively. Other rapidly growing cities include Bengaluru in India, Austin and Scottsdale in the United States, Ho Chi Minh City in Vietnam, and Sharjah in the UAE, demonstrating how global mobility and visa-free access have become essential tools for expanding wealth. Also, look at the ranking of the richest men in the world.

Conclusion

In 2024, holding the most powerful passport in the world is synonymous with freedom, opportunity, and prestige. It’s not just a travel document—it’s a symbol of global openness. As the ranking of the most powerful passports continues to evolve, reflecting global dynamics, one thing is certain: having a powerful passport means having the world at your fingertips.

Posted on

US inflation: the CPI figure

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

The Consumer Price Index (CPI), used to estimate inflation in the United States of America, has just come out.

The market’s fate depends on US inflation and, thus, on the Consumer Price Index (CPI) figure released today. For several months now, the question has been raised as to when the Federal Reserve (FED) will make its first interest rate cut, and, as its chairman Jerome Powell has repeated to the point of nausea, the decision depends mainly on US inflation. This has been orbiting around the 3% threshold for more than a year and has risen from 3.5% to 3.3% since March.

What does the latest CPI data tell us? On 31 July, the last Federal Market Open Committee (FOMC) meeting this summer, the first interest rate cut since 2020 will take place. 

US inflation at what to expect?

US inflation is now at, while ‘core’ inflation, stripped of the more volatile components represented by food and energy prices, is at. This is down from previous months but still far from the 2% target, a threshold considered healthy for the economy.

As we know, this figure is derived from the Consumer Price Index (CPI), an economic indicator used to measure the price development of goods and services purchased by consumers over time. The CPI is calculated by collecting data on the prices of a representative ‘basket’ of goods and services that consumers usually buy. This basket includes various products, such as food, clothing, housing, transport, education, health care and other common goods and services.

Jerome Powell said in a speech this Tuesday: ‘The FOMC only considers a reduction in the target range for rates to be appropriate once it has greater confidence that inflation is moving sustainably towards the 2% target. Who knows whether today’s US inflation figure justifies such a move?

Despite the above statement, which was far from optimistic, the chairman of the FED did, through another statement, give a slight boost to the markets, especially the traditional ones. He stated that: “in case the US cuts rates too late (or too little), it could adversely affect the economic situation.” 

In short, as is often the case, the scenario is rather intricate. On the one hand, the Fed might decide to start cutting interest rates, perhaps by 25 basis points, after the joyous news that came out today. On the other hand, the slowdown in inflation might not be sharp enough and, therefore, not justify a rate cut.

The impact of a rate cut

The FED’s decisions on interest rates directly affect people’s daily lives. Higher interest rates mean more expensive loans for house, car and business purchases but offer higher returns to savers who choose government bonds. Conversely, lower rates make loans more affordable but reduce returns on savings. For example, in 2023, 30-year mortgage rates reached an annual high of 7.79% before falling to 7.03% at the end of May 2024.

The FED’s decisions also influence the stock and cryptocurrency market volatility. In all likelihood, a more expansive or, as they say in the jargon, ‘dovish’ monetary policy stimulates the performance of these assets, which are considered riskier than bonds. The bull market of 2021, for example, began precisely when the major global economies, above all the US economy, decided to adopt economic policies that would stimulate growth to recover from the severe crisis caused by the COVID-19 pandemic. 

Enter the crypto world

We will see whether the latest US inflation figures released today will set the stage for a similar scenario in the months to come or whether, on the other hand, the situation is still delicate, and we will still have to wait several months to see the first interest rate cut.


Posted on

Differences between Mortgage Rates: Eurirs, Euribor, ECB and Inflation

The central reference rates for mortgages, Eurirs, Euribor, and ECB, differ. How do they vary with inflation, and how do they affect the cost of a mortgage?

The interest rate on your mortgage is one of the most important aspects to consider when deciding to borrow money. Understanding the differences between Eurirs, Euribor, and ECB rates can make a big difference in choosing the most suitable loan. 

Let’s examine in detail how these rates work, how they vary, and what influence inflation has on them.

Euribor: variable-rate mortgages

The Euribor, or Euro Interbank Offered Rate, is the average interest rate paid by banks in the Eurozone to lend money to each other. Or, in simple terms, it represents the cost of money in the Eurozone at a given time. The Euribor is calculated daily by the European banking federation through the weighted average of the interest rates of the most active banks in the Eurozone. This index varies daily and can have different reference durations, from one day up to 12 months. For example, the three-month Euribor rate was 3.7% on 10 July 2024. 

But what does this have to do with mortgages? The Euribor interest rate is the benchmark (or reference) used to calculate the interest rate of financial products such as personal loans, mortgages and variable-rate bank deposits. In other words, the instalments that those who have taken out a variable-rate mortgage have to pay vary directly to Euribor; if Euribor falls, they become cheaper. 

Eurirs: fixed-rate mortgages

On the other hand, the Eurirs (Euro Interest Rate Swap) is the reference rate for fixed-rate mortgages. Like the Euribor, it represents the cost at which banks and other European credit institutions borrow money from each other at a predetermined cost. The Eurirs is calculated daily by the European Banking Federation and varies depending on the loan duration. The longer the period, the higher the rate applied. For example, as of 10 July 2024, Eurirs rates for a 20-year mortgage were 3.6%.

ECB interest rates

Finally, we come to the ECB interest rates, the ones we hear about most often, especially from 2021 onwards, as they have been raised to fight inflation. These are decided monthly by the European Central Bank and represent the rate at which commercial banks can borrow money from it. To understand the difference between previous lending rates and ECB interest rates, the ECB interest rate can be interpreted as the ‘wholesale price’ of money for European banks. 

However, to understand how these vary, we cannot ignore inflation, an economic phenomenon that represents the general increase in prices over time and reduces the purchasing power of currencies. 

But why does inflation affect interest rates? The relationship between these two values is not direct. Interest rates do not automatically change in relation to inflation since they are decided by the ECB. However, the world’s central banks intervene when the cost of money reaches worrying levels, in most cases, by raising them.In conclusion, choosing the right mortgage requires understanding the different reference rates and their variations. Eurirs offers stability for fixed-rate mortgages, while Euribor represents variability for variable-rate mortgages. The ECB rate directly influences the short-term cost of money, and inflation plays a crucial role in the economy, affecting all interest rates.

Posted on

US elections: the impact on the price of Bitcoin

Donald Trump's meme coin on Solana

What impact will the US election have on the price of Bitcoin? According to Standard Chartered, they could cause the cryptocurrency to explode to the upside.

Many analysts believe Donald Trump’s victory in the upcoming US elections could favour Bitcoin and the cryptocurrency sector. Standard Chartered Bank, one of the UK’s most important financial companies, supports this thesis.

What is the basis for this belief’s recent spread? Should Donald Trump return to the White House, where could the price of Bitcoin go? Standard Chartered has updated its BTC price forecast to $150,000 by the end of 2024.

Buy Bitcoin!

US elections: Why could a Trump victory be good?

The first aspect to consider in estimating the impact of Donald Trump’s inauguration on Capitol Hill is the regulatory one. The tycoon has reiterated several times that he has no intention of repressing the use of Bitcoin and, therefore, would not oppose the cryptocurrency sector should he win the US elections. One of the last statements on the subject dates back to March when Trump said on CNBC’s microphones that he was aware of and accepted the phenomenon, even though he reiterated his total and unconditional support for the dollar.

Another theory that accompanies the belief of those who expect a bullish crypto market in the event of a Donald Trump victory is related to the incumbents at the head of key government institutions. Should Joe Biden’s term, and with it the current Democratic term, come to an end, some heads could ‘jump’. 

The industry’s eyes are mainly on Gary Gensler, the chairman of the Securities and Exchange Commission (SEC) and its biggest antagonist in recent years. Gensler has long been linked to the Democratic Party, and therefore, a rise to power of the Republican faction could put his chair at risk.

As proof of this, in a video recently made public on X (formerly Twitter), Trump states that ‘they’, referring to the Democrats and Gary Gensler, are hostile to cryptos and jokes that, according to him, Joe Biden doesn’t even know what they are. In short, cryptocurrencies could find fertile ground within the institutions should Trump win the US elections on 5 November 2024.

Will Trump inject liquidity into the markets?

It is indeed worth noting that Donald Trump has favoured highly expansive monetary policies characterized by near-zero interest rates and debt monetization. These policies could have a significant impact on the price of Bitcoin in the event of his re-election in the 2024 US elections. This term refers to the tendency of governments to use central banks as buyers for their debt. In other words, when this scenario occurs, the Federal Reserve (FED) would issue new money to buy US government bonds. This scenario is particularly attractive when the public debt of the country in question is particularly high and, above all, when there is a risk that the markets begin to doubt its sustainability.

But what impact would this forcing of the economy have on the cryptocurrency sector? The only way to estimate this is to analyse data from the last Trump term, when interest rates were close to zero, such as ‘confidence’ in the US treasury market or US government bonds. Suffice it to say that during the first term, the average annual net sale of US government debt reached USD 207 billion, compared to USD 55 billion during the Biden presidency. The crypto and stock markets boomed at that juncture as they provided a hedge against de-dollarisation. One of the side effects of this practice is, in fact, currency devaluation, which is generated by increasing the amount of money circulating in an economic system.

Bitcoin price predictions

Having clarified the economic and regulatory environment, it is time to address the possible influence of the US elections on the price of Bitcoin. Obviously, it is impossible to know what will happen should Donald Trump return to the White House, but this does not stop industry commentators from publishing their predictions.
Standard Chartered’s, already anticipated in the introduction of this article, had more media resonance. For the UK bank, the price of Bitcoin will reach $150,000 by the end of 2024 should Donald Trump become the US president for the second time in history. But that is not all! According to Geoff Kendrick, Head of Crypto Research at the financial company, the value of a single Bitcoin could touch $200,000 in 2025.

Posted on

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.


Posted on

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?

Buy BTC

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?


Posted on

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.

Download Young Platform and follow the price of BTC

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.

Download Young Platform and follow the price of ETH

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.

Download Young Platform and follow the price of BTC

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.

To follow these and other real-time news and check crypto market prices, sign up for Young Platform.

Posted on

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?


Posted on

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.