Pro
Macro

Analyst Note: Currency Crises in a Crypto Context

Tom DunleavySep 28, 2022 ⋅ 6 min read

Key Insights

  • The U.S. inflation picture and broader fiscal situation, while challenging, are drastically better than the rest of the world.
  • This strong juxtaposition and a mounting energy crisis in Europe have led the pound and euro to rapidly depreciate against the dollar.
  • Investors recently sold pounds and euros to buy Bitcoin in record numbers due to local currency stress. We did not see a similar dynamic with Ether or gold.

The U.S. vs. the World

The U.S. inflation situation is quickly improving.

Housing prices are cratering (~30% of PCE, ~40% of CPI). A strong dollar is making import prices cheaper. Supply chain strains are easing, with U.S. ports seeing record low wait times. A weak hurricane season and releases from the Strategic Petroleum Reserve (SPR) have helped drastically reduce oil and gas prices domestically. Wage increases have stagnated, easing fears of a wage-price spiral. Most importantly, the Fed is talking tough. They are ready to hike rates until they get inflation under control.

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Tom Dunleavy

47 Reportsdunleavy89

Tom is a Sr. Research Analyst at Messari. His primary focus is on Layer-1's as well as the relationship between traditional finance and crypto. Prior to joining Messari, Tom worked in Investment Consulting at Meketa and Investment Management at SSGA. Tom studied Finance at Bentley University and earned his CFA and CAIA Charters.

Mentioned Assets
Outline
  • Key Insights
  • The U.S. vs. the World
  • Hard Money in Times of Trouble?
  • What's Next?
Author
Tom Dunleavy
Tom is a Sr. Research Analyst at Messari. His primary focus is on Layer-1's as well as the relationship between traditional finance and crypto. Prior to joining Messari, Tom worked in Investment Consulting at Meketa and Investment Management at SSGA. Tom studied Finance at Bentley University and earned his CFA and CAIA Charters.
47 Reportsdunleavy89
Mentioned Assets