Category: Economics

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Bitcoin Crypto News Economics

El Salvador to Start Purchasing 1 Bitcoin a Day

The President of El Salvador, Nayib Bukele, announced via Twitter that the Central-American nation will start accumulating Bitcoin (BTC) at the rate of one Bitcoin per day starting from today, November 18, 2022. 

El Salvador previously became the first country in the world to recognise Bitcoin as legal tender last year and already reportedly owns 2,381 Bitcoins. 

So far however, El Salvador’s foray into Bitcoin investing hasn’t paid off — the nation is estimated to have spent around US$100 million on Bitcoin, which is currently valued at around US$40 million, meaning it’s currently sitting on unrealised losses of around US$60 million.

The International Monetary Fund has previously warned that the country’s use of Bitcoin poses “large risks” when it comes to the stability of El Salvador’s financial institutions, financial integrity, consumer protections, and liabilities related to the use of public money to fund Bitcoin’s adoption.

We’re Still Early, Says El Salvador

El Salvador had not bought any BTC since July, when it picked up 80 BTC at the price of around US$19,0000 per coin.

But since BTC’s price has fallen in the wake of the FTX collapse, El Salvador apparently believes now is the time to start dollar-cost averaging. 

On Twitter, Bukele explained his belief that BTC is “the opposite” of FTX, stating BTC was designed specifically to avoid frauds and bank runs, and that purchasers of BTC are “still early.”

Justin Sun Chimes in to Match El Salvador 

The founder and CEO of the Tron blockchain, Justin Sun, responded to Bukele’s announcement by stating that Tron DAO will also start buying 1 BTC per day to store in its reserve. The Tron DAO Reserve is used by Tron to maintain the value of Tron-based stablecoins and to mitigate other financial risks to the blockchain.

If El Salvador continues to buy at the rate of 1 BTC per day for a prolonged period of time it could substantially increase its bitcoin holdings by the the time the next crypto bull market arrives. 

For a country already saddled with significant national debt, this aggressive BTC accumulation strategy is high risk — both Bukele and the citizens of El Salvador will be praying it pays off over the next few years. 

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Bitcoin Crypto News Economics Market Analysis

Latest US Inflation Report Higher Than Expected – Bitcoin Swings 6%

Bitcoin with chart in the background

A higher than expected CPI figure from the US Department of Labor released on October 13 saw Bitcoin’s (BTC) price immediately plummet, before recovering to sit up 1.5 percent.

The inflation figure of 8.2 percent was higher than the 8.1 percent most market watchers had predicted, sending both crypto markets and traditional financial markets tumbling. 

According to data from CoinGecko, immediately following the news Bitcoin’s price dropped over three percent from just over US$19,000 to US$18,317. In the hours since the initial decline, both traditional and crypto markets rallied strongly. At the time of writing, Bitcoin was changing hands at US19,423.

Recovery Follows Traditional Markets

After the initial rapid fall, traditional markets closed the day up, with the Dow up 2.8 percent on the day and the S&P 500 up 2.6 percent. The popular view is that crypto markets reacted to what was going on in the traditional markets and tracked their behaviour.

Analysts aren’t entirely sure what caused the traditional markets to rally so strongly after the initial impact of the CPI announcement, but some say the high CPI figure was simply already priced in.

Core Inflation High, Markets Await November Rate Announcement

The core inflation figure, which came in at 6.6 percent, is perhaps even more worrying than the headline figure. Core inflation, which excludes food and energy prices, now sits at its highest level in forty years and suggests high inflation may be becoming a more permanent feature of the US economy. 

With such a high core inflation figure it’s now likely the US Federal Reserve will issue a large rate hike when they meet in November. 

Further evidence of a likely large rate increase comes from data on federal-fund futures trading from CME, which suggests a strong chance of an interest rate rise of 75 basis points, or 0.75 percent. 

Generally, rate hikes have been bad news for risk-on investments like cryptocurrency, so the next few months may be a tough time for the crypto markets.

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Australia Crypto News Economics

Australian Inflation Hits 21-Year High as Crypto Market Eclipses $1 Trillion

The Australian consumer price index (CPI) has risen to 6.1 percent for the 12 months ending June 30, the country’s highest inflation level since June 2001:

Just over a year ago, some raised alarm bells as the CPI increased to 3.8 percent. At the time, academics provided a host of reasons not to worry, and this view was supported by the Reserve Bank of Australia (RBA), which expected inflation to reduce to 1.5 percent in 2022. As it turns out, the projections were all wrong.

According to the latest report by the Australian Bureau of Statistics (ABS), the CPI has risen by 1.8 percent over the past quarter and 6.1 percent over the past year.

CPI fluctuations over the past decade. Source: ABS

Of course, the CPI metric is in itself not uncontroversial, since virtually everyone has a different rate of inflation depending on levels of income, consumption habits, location and the like.

Furthermore, when the method of calculating inflation changes, as it frequently does, it almost never results in an increase in CPI, only a decrease. Cynics would call that political expediency.

Transport, Housing Largest Contributors to CPI

Notwithstanding, a weighted average across Australia’s capital cities provides insight as to the largest overall contributors to the official CPI figure, most notably transport (13.1 percent) and housing (9 percent):

Weighted average of eight capital cities. Source: ABS

Australian Treasurer Jim Chalmers described the latest inflation figures as “confronting”, adding that things would likely get worse before improving:

These numbers are obviously for the June quarter, and there is price pressure to follow the period that we are learning more about today.

Jim Chalmers, Australian Treasurer

Given the current inflationary pressures, the RBA is expected to once again hike interest rates next week, with analysts pointing to 0.5 percent and 0.75 percent as being the most likely increases.

Crypto Market Rises

Across the pond, shortly after the US Federal Reserve increased the federal funds rate, the overall crypto market lifted from around US$970 million to just shy of US$1.05 trillion at the time of writing.

BTC and ETH both posted strong overnight gains of 9 and 12 percent respectively, amid growing signs that the broader crypto market contagion may be somewhat contained.

Nonetheless, the broader macro environment remains uncertain and highly volatile. In the short to medium-term, however, it remains to be seen whether this latest relief rally is an indicator of a market sentiment shift or merely a temporary respite from the biting crypto winter.

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Bitcoin Economics Investing Markets

Bitcoin Dips Below $19,000 Amid Highest US Inflation Print in 40 Years

Bitcoin briefly dipped below US$19,000 on July 13 following the announcement of a higher than expected Consumer Price Index figure in the US. 

Economists were tipping a June year-on-year inflation number of 8.8 percent, but the announced rate came in at 9.1 percent – the highest figure in over 40 years – leading to an immediate and sudden dip in BTC’s price.

Recovery Follows 4.5% Dip

According to data from CoinMarketCap, in the hour following the CPI announcement BTC’s price dropped more than 4.5 percent, from US$19,989 to US$18,999. The price has since recovered and at the time of writing BTC was changing hands at US$20,234.

Prior to the current crypto bear market and skyrocketing inflation in the broader economy, BTC had been widely considered an inflation hedge. In January, despite rising inflation, BTC appeared to find support at around US$43,000, but as inflation has continued to surge and the crypto market has hit significant turbulence, its price has tumbled.

Since January, BTC’s price has dropped by almost 60 percent leaving many questioning whether Bitcoin truly is an effective hedge against inflation:

Where To From Here?

The record high inflation numbers will likely see central banks around the world, including in the US, continue to hike rates in an attempt to restore price stability at the expense of short-term economic growth.

Speaking at a recent European Central Bank forum, US Federal Reserve chair Jerome Powell affirmed the importance of getting on top of rising inflation:

Is there a risk we would go too far? Certainly there’s a risk … The bigger mistake to make – let’s put it that way – would be to fail to restore price stability.

Jerome Powell, chair, US Federal Reserve

Generally speaking, higher interest rates mean less money circulating in the economy resulting in downward pressure on consumer spending and inflation, which may also translate into less money in the pockets of crypto investors and further falls for crypto prices.

This picture is further complicated by the unique factors causing the current wave of inflation – the war in Ukraine and ongoing complications from the Covid pandemic – which aren’t easily addressed with interest rate rises, resulting in significant economic uncertainty in the medium term.

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Bitcoin Crypto News Economics Markets

Bitcoin Sinks Below $29k, its Lowest Level Since 2020

Bitcoin has continued its dramatic descent, falling below US$29,000 to its lowest point since December 2020. It’s currently hovering around that $29,000k support level, with everyone wondering which way it’s going next.

BTC/AUD price chart. Source: CoinMarketCap

The US Consumer Price Index (CPI) figures were published on May 11 and the knock-on effect saw Bitcoin piercing the $30,000 support at US$28,170. April’s annual CPI figure is 8.3 percent, down 0.2 percent from the previous month, yet the update sent Bitcoin into a frenzy, its price falling from US$31,700 to $28,170 in as little as 20 minutes, followed closely by a rebound to approximately $31,600:

When In Doubt, Zoom Out

It’s easy to focus on the current dip in price, but if we zoom out further on the timeline we can see the trajectory is still moving upwards overall.

Source: Twitter
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Banking CBDCs Economics Payments

90% of Central Banks are Exploring CBDCs: BIS Report

A survey by the Bank For International Settlements (BIS) has found that nine out of 10 of the central banks surveyed are exploring central bank digital currencies (CBDCs), and over 50 percent are actively developing CBDCs or running concrete experiments.

The survey found more central banks were working on retail CBDCs, which are designed for domestic consumer use, compared to wholesale CBDCs, which are designed for institutional uses such as cross-border payments between banks:

Central Bank Interest in CBDCs Increasing Globally

The report, released on May 6 by the BIS Monetary and Economic division, detailed the results of the survey conducted in October-December 2021 which involved 81 central banks, representing 76 percent of the world’s population, including 25 advanced economies.

Key findings include:

  • 90 percent of central banks are exploring CDBCs;
  • 26 percent are currently running CDBC pilots; and
  • more than 60 percent are conducting proof-of-concept work.

The survey also also found the percentage of central banks exploring CDBCs is up from the 2020 figure of 83 percent. BIS suggests that this increase was driven partially by the Covid-19 pandemic and the emergence of stablecoins, particularly in advanced economies. 

Retail CBDCs a Priority 

In many countries, work on retail CBDCs is more advanced than on wholesale CBDCs, with the report finding that:

Globally, more than two-thirds of central banks consider that they are likely to or might possibly issue a retail CBDC in either the short or medium term.

2021 BIS survey on CBDCs

That’s not to suggest there’s no enthusiasm for wholesale CBDCs, however, with the report finding that cross-border transfer times and complexity are key drivers of wholesale CBDC development:

“Work on wholesale CBDCs is increasingly driven by reasons related to cross-border payments efficiency,” the survey found. “Central banks consider CBDCs capable of alleviating key pain points such as the limited operating hours of current payment systems and the length of current transaction chains.”

In Australia, CBDC exploration is well and truly under way, with the central bank having last September launched Project Dunbar, a multi-CBDC project run in partnership with the central banks of Singapore, Malaysia and South Africa and the BIS. The results of Project Dunbar found that while multi-CBDCs are technically viable, there are significant regulatory and jurisdictional hurdles to overcome.

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Crypto News Economics Investing Markets

Crypto Markets Tumble Amid Worst Stock Market Sell-Off Since March 2020

Despite a short-lived rally mid-week, crypto markets have tumbled over the past few days as they follow the lead of the US stock market, which on May 5 recorded its single worst day of trade since March 2020.

According to data from CoinMarketCap, at the time of writing Bitcoin was trading at US$36,421, a 24-hour loss of 8.07 percent, while the overall crypto market cap was down 7.65 percent.


7-Day Total Cryptocurrency Market Cap. Source: CoinMarketCap

Financial Markets Plunge in Response to Rate Rise

The falls on the stock market that sparked the crypto losses were triggered by the US Federal Reserve’s decision to raise interest rates by 50 basis points. 

On May 4 the news was initially welcomed by markets, as it was in line with what many expected, spurring the S&P 500 to its biggest daily rally in two years. The following day, however, traders reconsidered the implications of the rise and the market dumped: the S&P fell 3.56 percent, the Dow Jones was down 3.12 percent and Nasdaq plunged 5.06 percent – its largest single-day percentage drop since 2020.

Crypto Down Across the Board

In line with the traditional financial markets, crypto was down virtually across the board. In addition to Bitcoin’s almost 8 percent drop on May 5, most top 10 coins saw substantial losses: Ethereum fell 6.78 percent, Solana was down 10.75 percent and Cardano lost 12.09 percent.

Given the changed broader economic conditions, Bitcoin and the wider crypto market face an increasingly uncertain period. Rekt Capital suggested on Twitter that US$38,400 may mark the new line of short-term resistance, and the popular crypto market analyst believes that BTC will need to close the month above that figure to have much chance of a rally in the medium term:

So far, 2022 has been an unhappy year for crypto generally – this latest downturn, in addition to several other sharp declines, including major losses in January and again in April, have left the crypto market cap down over 20 percent since January 1.

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Australia Economics

Australian Consumer Price Inflation Records Largest Annual Increase Since 2000

Australia has this week recorded its largest quarterly and annual inflation increase since 2000. The ABS has released data stating the consumer price index has risen 5.1 percent on a yearly basis and 2.1 percent in the first quarter of 2022.

Life Keeps Giving Lemons

Australia’s new inflation rate exceeds the 5 percent mark registered in 2008, which accompanied the global financial crisis. It’s also the highest quarterly and annual rate since the 6.1 percent rate that marked the introduction of the goods and services tax (GST) in 2000.

The latest rise has been larger than originally anticipated, leaving many wondering whether the Reserve Bank of Australia (RBA) will have no choice but to increase official interest rates as a counter:

Inflation Rates Rise Globally

Naturally, inflation isn’t exclusive to Australia and can be cryptocurrency-related. In July 2021, Aussie inflation rose by 3.8 percent, aided by Bitcoin’s return from its low point. At the time it was believed that the increase would be temporary, resulting from several one-offs.

And in the US, inflation hit a 40-year high last month, rising to 7.9 percent. Almost all costs of living are up, including gas, fuel, housing and food prices, as Russia’s conflict with Ukraine intensifies.

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Australia Blockchain DAO Economics

RMIT Proposes ‘Docklands DAO’ to Help Melbourne Precinct Recover From Pandemic

A report released by the Royal Melbourne Institute of Technology’s Blockchain Innovation Hub has proposed the creation of a decentralised autonomous organisation (DAO) to help revitalise the Docklands district of Melbourne, following Covid-related lockdowns and restrictions that affected the city more than most others in Australia.

The April 7 report is the second of five commissioned by the Victorian Higher Education State Investment Fund (VHESIF) to explore opportunity areas for the creation of a digital CBD in Melbourne.

Docklands Ideal Location for DAO Pilot

The report’s author, Dr Max Parasol, believes the Docklands precinct would be the ideal location for the pilot DAO project because it faces a number of challenges due both to its location and the economic consequences of the Covid pandemic:

  • It’s geographically disconnected from Melbourne’s CBD.
  • It faces inconsistent and reduced foot traffic due to work-from-home and hybrid work models.
  • Local businesses have unpredictable inventory requirements. 
  • There are negative impacts from tenant rent discounts and vacancies.

Dr Parasol said the creation of a Docklands DAO would empower businesses to overcome these challenges and reinvigorate the local economy:

A Docklands DAO would encourage community buy-in and engagement as a way to regenerate the precinct … the beauty of a DAO is that it provides greater levels of transparency, openness and democratic governance so every member of the DAO [the community] has a voice and voting power.

Dr Max Parasol, RMIT Blockchain Innovation Hub

A DAO is an open-source, blockchain-based organisation defined by rules encoded in a smart contract and governed by members who vote on proposals using governance tokens.

Docklands DAO Would Launch in Two-Stage Process

The report suggests a two-stage process for the creation of Docklands DAO. The first stage would involve the collection of anonymised local people traffic data and other key metrics such as rental costs, with the goal of assisting local businesses to more accurately predict customer numbers and business expenses.

In stage two, Docklands DAO assumes control of the collected data. Local business owners and community members, as part of the DAO, would vote on how to use the data to optimise resource allocations and improve the local economy to benefit all DAO participants.

Jason Potts, co-director of the RMIT Blockchain Innovation Hub, suggests DAOs such as the proposed Docklands DAO will help communities manage new digital resources and overcome the challenges of a post-Covid world:

The technology is just a vehicle for a new approach to community-led and community-owned discovery of new resources and opportunities with which we can continuously reinvent the local economies that make up our cities, and that has never been more important than right now. 

Jason Potts, co-director, RMIT Blockchain Innovation Hub

RMIT has been a prominent player in the Australian crypto space, having last year urged the federal government to reform crypto tax settings and being ranked second in CoinDesk’s global Top Universities for Blockchain list.

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Bitcoin Crypto News Economics

El Salvador’s Bitcoin-Backed Bonds Set to Roll Out Despite Geopolitical Turmoil

Late last year, El Salvador announced plans to raise US$1 billion using bitcoin-backed bonds. Half of the proceeds would go towards building “Bitcoin City”, with the other half going towards acquiring more bitcoin to add to the country’s balance sheet.

The launch was scheduled for this week, but geopolitics had other plans:

Rollout Happening, but Timing Unclear

According to a Reuters report, El Salvador is looking for the right timing to launch its controversial bitcoin-backed bonds, which apparently could happen sometime between now and March 20, although delays are expected.

We believe that between March 15 and 20 is the right timing; we have the tools almost finished. But the international context will tell us … I didn’t expect the war in Ukraine.


Alejandro Zelaya, finance minister, El Salvador

Finance minister Alejandro Zelaya added further that “we’re still finishing some details, [but] almost everything is ready”:

Uncertainty Prevails

Analysts have had a difficult time predicting the likely demand for the bitcoin-backed bonds, given that sparse details have been provided. It also seems that since the initial announcement, the goalposts have been somewhat shifted:

These bonds started as a sovereign bond; now, it is a securitised corporate bond, which raises the question of success.

Nathalie Marshik, head of emerging markets sovereign research, Stifel Financial

Rather than being issued by the state, reports indicate that the bonds will instead be issued by a state-owned energy company, LaGeo:

It has been argued elsewhere that El Salvador’s radical moves are in large part motivated by a desire for the nation to regain its financial independence from creditors, including global organisations such as the International Monetary Fund (IMF):

Despite El Salvador recording 10 percent GDP growth in 2021 and an increase of 30 percent in tourism over the same period, persistent fiscal deficits and high debt service are leading to large and increasing financing needs.

Republic on an ‘Unsustainable Path’

El Salvador’s adoption of bitcoin as legal tender has always been viewed as controversial and in fact led to a credit rating downgrade of the nation’s sovereign debt. In a January statement, the IMF called on El Salvador to limit the scope of the bitcoin legal tender law, describing the country as being on an “unsustainable path”.

Whatever your view of El Salvador’s embrace of bitcoin, it’s self-evident that President Nayib Bukele is making bold moves, which could end up disturbing the legacy financial system as we know it.