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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.


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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.

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US elections: the impact on the price of Bitcoin

donald-trump-wins-2024-election-us-president-agenda

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.

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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.

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Self-Improvement Books: Which Are the Best?

Which are the best self-improvement books? A list of ten titles you absolutely must read.

Identifying the 10 best self-improvement books is a challenging, nearly impossible task given that every reader has their tastes and may be driven by specific needs. However, given the incredible literary output in this field, it can be helpful to make a selection, especially for those who need to choose their first book of this type and don’t know where to start.

Here is our list of the 10 best self-improvement books.

  1. “Deep Work” by Cal Newport

“Deep Work” explores the importance of dedicating oneself intensely to complex and meaningful tasks to achieve extraordinary results. Newport provides practical strategies for cultivating concentration and improving productivity.

This book is perfect for those who want to reduce distractions and increase the effectiveness of their work. It helps them develop the ability to work deeply and manage time better.

After reading this book, you might start exploring the world of cryptocurrencies. Through this work, Cal Newport provides very effective tips for studying and delving into the most complex topics of our time. What could be better than this innovative sector where various disciplines mix, mainly computer science and economics?

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  1. “Atomic Habits” by James Clear

“Atomic Habits” offers a detailed guide on how to build positive habits and eradicate negative ones through small daily changes. Clear uses scientific research and personal stories to illustrate how habits shape our lives. This book is essential for those who want to improve gradually and achieve lasting results, offering simple and practical strategies that can lead to significant changes in their lives.

  1. “The Power of Now” by Eckhart Tolle

“The Power of Now” is a classic in all bookstores in the self-improvement section. It teaches the importance of living in the present to achieve inner peace and happiness.

Tolle combines elements of philosophy and psychology, offering a practical guide to living a more mindful and fulfilling life. Through the book, Tolle helps readers free themselves from the chains of the past and worries about the future, focusing on the only moment that truly matters: the present.

  1. “Your Erroneous Zones” by Wayne W. Dyer

“Your Erroneous Zones” is a fundamental book for those who want to free themselves from self-limiting thoughts and behaviours. Wayne W. Dyer offers practical strategies to identify and overcome “erroneous zones,” or those ways of thinking that prevent achieving full personal fulfilment. This book invites you to take control of your life and live it more authentically and freely.

  1. “The 7 Habits of Highly Effective People” by Stephen R. Covey

This book is a comprehensive guide to improving personal and professional effectiveness through seven fundamental habits. Covey provides tools and strategies to develop a balanced and productive life, making it a must-read for anyone who wants to improve their time management and leadership skills.

  1. “Designing Your Life: How to Build a Well-Lived, Joyful Life” by Bill Burnett and Dave Evans

Bill Burnett and Dave Evans, professors at Stanford University, present an innovative approach to designing a fulfilling life using design thinking principles.

“Designing Your Life” offers practical tools for fully exploring your passions, overcoming obstacles, and building a rewarding career and life. This book is ideal for those seeking a structured method for tackling important life decisions with creativity and confidence.

  1. “Think and Grow Rich” by Napoleon Hill

A classic of motivational literature, “Think and Grow Rich” explores the fundamental principles of financial and personal success. Hill analyses the habits and philosophies of great businessmen and suggests to readers how to apply them in their daily lives to achieve ambitious goals.

Based on decades of research, this book offers practical strategies for achieving success.

  1. “Tools of Titans” by Tim Ferriss

“Tools of Titans” is a collection of advice and strategies from some of the world’s most brilliant and successful people, gathered and commented on by Tim Ferriss.

The book covers many topics, including health and professional life, offering practical insights and the right inspiration to improve your lifestyle. Ferriss distils information from over 200 interviews with world-renowned athletes, entrepreneurs, and artists, making this book a treasure trove of valuable knowledge.

  1. “The Elephant in the Brain” by Kevin Simler and Robin Hanson

“The Elephant in the Brain” analyses the unconscious motivations that drive our behaviour. The authors argue that many of our actions are guided by hidden motivations we do not know. This book offers a fascinating perspective on how the human mind works and how our true motivations influence our daily behaviour.

  1. “Principles: Life and Work” by Ray Dalio

Ray Dalio, one of the world’s most renowned investors and entrepreneurs, shares the principles guiding his life and career. The book is a collection of lessons on how to face personal and professional challenges with wisdom and integrity, offering valuable teachings on leadership, risk management, and innovation. Dalio presents a structured approach to life and work based on clear and tested principles, which can help anyone improve their decision-making skills and succeed.

These books represent some of the best resources available for those looking to improve themselves and succeed in various life aspects. Each offers practical tools and strategies that can be immediately applied to begin one’s journey of personal growth.

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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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“Buy the dip”: the siren song or the Oracle of Delphi?

buy the dip

“Buy the dip” is a phrase often heard in the world of investment and trading, and it’s particularly popular among those active in the crypto market. Let’s take yesterday, Monday, 5 July, as an example: a sort of “Black Monday”. Anyone who didn’t feel queasy witnessing a BTC drop of over 18% must have heard the siren’s call. Dear Odysseus, shall we admit it? Buy the dip, Buy the dip, Buy the dip. This melody has echoed in the ears of those accustomed to the market’s slaps or who have nerves of steel.

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The last time we saw such a drop was two years ago. And in every crash, there are two faces: one of catastrophe and one of great opportunity. But, of course, not all dynamics can be under our control. Solid risk management is needed, as well as building diversified strategies over time to avoid being too exposed to the market. No one wants to be caught in a snowstorm in their underwear, even if we feel like superheroes (and no, don’t do it; it’s a mistake).

After all this preamble, the question is: what exactly is “Buy the dip”? Is it always worth following this “mantra“, or is it better sometimes to be more cautious? In this article, we will try to answer these questions, hoping to give you an extra sword and shield for the next battle. Our wish is that you may emerge victorious.

What does “Buy the Dip” mean?

The literal translation of “Buy the dip” is “buy the drop”. This trading practice involves purchasing an asset after its price has decreased, hoping this dip is temporary and the price will rise again soon. The idea is that the drop represents a buying opportunity at a discounted price, waiting for the market to rebound.

Advantages

  • Profit opportunities: Buying during a dip can be very profitable if the market rebounds and prices rise.
  • Average cost reduction: By adding positions during dips, an investor can lower the average purchase cost of an asset, improving the potential return.
  • Access to discounted prices: Buying assets during a dip offers the chance to acquire them at prices that could be considered discounted relative to their long-term value.

Limitations and Risks

Despite the potential advantages, Buy the Dip also presents significant risks:

  • No guarantee of rebound: An asset could continue to fall for various reasons, such as changes in economic fundamentals or company management. For example, a crypto that falls from $100 to $60 might seem a bargain, but if the project’s growth prospects are negative, it could drop even further.
  • Difficulty assessing intrinsic value: It’s often hard to tell if a dip is temporary or a sign of further declines. Buying just because the price has fallen isn’t always a good idea if the reasons for the drop aren’t understood. One must ask: Is the drop due to internal issues or external factors? Is it a temporary situation? Is the project resilient? How long will the price correction last?
  • Averaging down: If an investor already holds the asset and continues to buy during dips, they are adopting an “averaging down” strategy, which can be risky if the asset continues to lose value. This strategy, if not managed correctly, can lead to significant losses.

Risk management

When adopting Buy the Dip, we need a plan B—an escape route—something to avoid a fatal hemorrhage. What is it? Having a risk management plan. For example, setting a loss limit to avoid being trapped in a prolonged losing position. Some traders set an exit price to control losses. Suppose a crypto falls from $100 to $60, and the trader decides to sell if the price reaches $75 to limit losses.

Context

Buy the dip is often used in different contexts and can have varying probabilities of success depending on the situation.

  • During an uptrend: Some traders use this strategy when the market is generally rising. Imagine a crypto increasing in value but experiencing a slight drop at some point. Traders who believe in the strength of this uptrend see this dip as an opportunity to buy at a lower price, expecting the price to rise again soon. It’s like taking advantage of sales during a period of high demand.
  • Without a clear trend: Other traders use Buy the Dip even when there’s no evident uptrend. Here, the bet is that the asset’s current decline will increase. This can happen because they believe in the asset’s fundamentals or the project’s potential behind the crypto. It’s like buying a product at a flea market, hoping its value will increase over time, perhaps due to an improvement, a forthcoming novelty, or because the asset is currently undervalued.

“Buy the Dip” in the crypto market

Buy the Dip is a popular mantra in the crypto market, often promoted by influential traders and investors. However, it is important to remember that the cryptocurrency market is highly volatile, and dips can be significant and prolonged. Nevertheless, this strategy has proven successful when buying the most solid assets in the crypto market, particularly Bitcoin and Ethereum. For this reason, every time these cryptocurrencies drop, the mantra “buy the f****** dip” (BTFD) echoes across social media platforms used by enthusiasts in the sector.

It’s no coincidence that from 4 July, as BTC fell below $60,000 for the second time in four months, posts, tweets, and quotes on “Buy the dip” mushroomed on Reddit, X, 4chan, and Bitcoin Talk.

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Examples of “Buy the Dip”

A well-known example is the 2007-08 financial crisis, where many investors bought shares in companies like Bear Stearns and New Century Mortgage, expecting a recovery that never came. Both companies left the business after losing a significant share of their value. In contrast, those who bought Apple shares after the 2020 crash saw a significant increase in value, making the strategy highly profitable.

The opposite: “Sell the Rally”

The opposite approach to “Buy the Dip” is “Sell the rally”, which involves selling an asset whose price has increased, anticipating an imminent dip. Again, the goal is to maximise profits, but it carries similar risks, such as the possibility of selling too early or too late.

To conclude

“Buy the dip” can be a winning strategy in volatile markets and during long-term uptrends. However, it requires good market knowledge and well-thought-out risk management. It is not a foolproof technique and should not be adopted without a critical assessment of the circumstances and one’s risk profile.

Homework: To avoid being overwhelmed by FOMO, it is useful to remember the opposite mantra. Try repeating: “Time in the market beats timing the market”. This can help you keep a cool head and make more rational decisions.

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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.

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

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Crypto AI: Grayscale launches its ad-hoc fund

Grayscale has just announced its crypto AI fund. Find out what this innovative financial instrument consists of.

Grayscale has just announced its Decentralised AI Fund LLC. This brand-new investment fund will allow those who purchase it to gain exposure to the most important crypto protocols aiming to establish themselves in the artificial intelligence sector. 

What cryptos does this innovative fund consist of? What is Grayscale’s main goal, and what artificial intelligence problems could blockchain solve? Find out in this article.

Discover Crypto AI

Grayscale’s new crypto AI fund

Practically everyone knows Grayscale, mainly because it is the largest native crypto investment fund, the first to launch financial instruments on Ethereum and Bitcoin. For this reason, the news released in the past few hours is essential, given the ability of the team of this cutting-edge financial player to intercept new trends. 

The main problem with artificial intelligence, at least according to Grayscale, concerns the centralisation of the companies that control it. 

Few and far between are those who can offer products that can reach the masses, mainly due to the enormous amount of data they hold. As a solution to this problem, various decentralised AI protocols have emerged, aiming to make their processes even more innovative and intelligent. In particular, blockchain technology makes it possible to distribute the ownership and governance of AI services, thereby increasing transparency.

The cryptocurrencies that make up

For now, the information at our disposal tells us that The Grayscale Decentralised AI Fund will self-rebalance every quarter and will accommodate the following basket of cryptocurrencies:

Buy NEAR, RNDR and FIL

The team has yet to comment on possible future additions, but other cryptos will likely be added over time. Why did Grayscale choose these? Well, because they represent the three main categories of crypto AI around today:

  • Protocols that are building decentralised artificial intelligence services;
  • Projects that seek to solve the main problems encountered by AI platforms;
  • Infrastructure networks and resources required for technology development. For example, decentralised marketplaces for data storage, or those for exchanging GPU computing power and graphics rendering.


To conclude, we can quote the words of Rayhaneh Sharif-Askary, Head of Product & Research at Grayscale, who was mentioned in the press release through which the announcement was made. “The rise of these disruptive technologies has created exciting opportunities for investors, and we believe our crypto AI fund is a great way to invest in this emerging sector. Blockchain-based AI protocols embody the principles of decentralisation, accessibility and transparency and can potentially mitigate the fundamental risks emerging from the proliferation of this technology.”


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Crypto AI: the fusion of artificial intelligence and cryptocurrencies

Crypto AI: the fusion of artificial intelligence and cryptocurrencies

Artificial intelligence is also conquering the Web3. What is crypto AI, and what innovations will it introduce?

The fusion of blockchain technology and artificial intelligence is now much more than a trend, primarily since the launch of Chat GPT and other similar services, i.e. since its potential was understood. Less than two years later, many of us use these types of services daily, even if there is a feeling that the current scenario is only the tip of the iceberg. 

AI and cryptocurrencies will most likely become increasingly part of our lives. But can these two technologies work together, and, more importantly, why should they? 

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Artificial intelligence and cryptocurrencies

Artificial intelligence has been the key technology of the past two years, and cryptocurrencies and blockchain achieved supremacy, at least in part, during the bull run 2021. The big difference in adoption between these two technologies concerns the user experience, as the currently available examples of AI models are easier to use than blockchain protocols and decentralised applications. However, huge strides have been made in this regard in recent years.

However, the two key technologies of this decade can collaborate, and the crypto AI protocols that have emerged in recent months offer valuable support for this thesis. The convergence of blockchain and artificial intelligence became mainstream when ChatGPT was released. OpenAI’s chatbot was designed to interact with users like in a normal chat conversation with which everyone is familiar. On the other hand, the final consecration came in recent months after the staggering performance of Nvidia’s stock, which was, albeit briefly, the world’s largest company.

Since then, many crypto AI projects have sprung up, while existing ones have attracted attention. Moreover, some key protocols have intercepted and exploited the situation by reorganising and modifying their vision in a manner consistent with the needs of this new market segment. For instance, Filecoin has ridden the hype wave on artificial intelligence by offering itself as a storage service provider for emerging AI companies. Or Near, which is harnessing its large roster of developers to create decentralised, self-modifying AI based on user behaviour.

In short, these technologies can coexist; indeed, it is likely that they will. According to Alexander Good, author and respected Key Opinion Leader (KOL), the capitalisation of crypto AI could reach $2 trillion in the next few years, while Grayscale, the world’s largest crypto investment fund, has just launched its exclusive financial product for this sub-sector.

Decentralised AI models: what problems do they solve?

We can start with a technical assumption to answer the question posed in the subtitle, but don’t worry, nothing too complex. Blockchain and AI models feed off the same power source: computing power. In the same way that miners use powerful machines made up of video cards (GPUs) connected in series, the same computing power is used to train artificial intelligence models to make them increasingly accurate and thus useful. In this sense, crypto AI projects such as Render (RNDR) or Bittensor (TAO) deal with tokenising computing power that can then be exchanged and used by network users. Thanks to this possibility, AI models can become more accessible and decentralised. The immense power of artificial intelligence is, today, concentrated in the hands of large and prosperous companies that own the supercomputers needed to ‘run’ them.

The decentralisation discourse also applies to data indexing, i.e., the process of organising and returning data to users that ‘Chat GPT-style’ chatbots and search engines constantly perform. For instance, a protocol such as The Graph takes on-chain data and organises it, making it readable to users, all decentralised. It also uses Semiotic AI to automate searches within its data containers.

Explore Crypto AI

Let us now take a look at the main three objectives of the crypto AI segment and the projects related to them:

  • Building decentralised artificial intelligence services and facilitating user access: In this respect, the main project to watch out for is the Bittensor (TAO) mentioned above, a centralised machine learning platform with more than 90,000 users. Through Bittensor, particularly its sub-networks, it is possible to generate texts, translations, and images that are very precise regarding the prompts you enter. In short, it is a fully decentralised GPT Chat with an internal economy that rewards users who secure it and those who use it.
  • Solving the main problems encountered by AI platforms, such as the authenticity of information and deep fakes (fictitious videos or photos in which the image of a public figure appears). In this sense, crypto AI projects can exploit the key features of blockchain technology, particularly its decentralised nature, transparency, and immutability, to protect users from these threats. 
  • Managing the infrastructure networks and resources required for technology development, particularly storage and GPU computing power. In this sense, the projects that stand out are Filecoin (FIL) and Render (RNDR). As already mentioned, the former allows users to store data through a centralised peer-to-peer cloud-based architecture. This is a perfect solution for emerging artificial intelligence companies.

Render, on the other hand, thanks to its decentralised marketplace for graphics rendering, allows anyone who wants to access the service, whether designers or artificial intelligence models, to do so without having to buy expensive equipment.

Crypto AI: our thematic Moneybox

Now that you know all the main applications of crypto AI and the problems they solve, you just have to discover our new ‘Artificial Intelligence’ Moneybox. We, like Grayscale, intend to enable our clients to gain exposure to this promising sector.

Our Crypto AI cocktail consists of three delicious ingredients: Render (RNDR), The Graph (GRT) and Near (NEAR).

Young Platform’s crypto Moneybox is a separate wallet from the one you normally use to store your cryptocurrencies. It is used to set aside your favourite cryptocurrencies for the long term, avoiding spending them on everyday or frequent transactions. Of course, you also have the option to ‘put your own spin on it’ by creating a Customised Moneybox and choosing up to five cryptos to include and the percentage to distribute on each.

If you want to learn about this functionality, you can consult the guide about Moneyboxes functionality.