📈 Inflation Matters.
💹 The recent inflation data is misleading, for Spain for example. The year-on-year reduction is based on the base effect of how the yearly variation is calculated, but in absolute terms, it continues to rise and doesn’t stop.
But, if we dive into the monthly data or the aggregate inflation, the picture shows that inflation is still on the rise.
The straightforward translation: our purchasing power continues to decline. Let’s give an example:
- 2020: A gym subscription costs €100.
- 2021: Due to a 10% inflation, it now costs €110.
- 2022: Even though inflation drops to 5%, the gym now costs €115.5 (an added 5% on the €110).
- 2023: This year, with a 3% inflation rate, the gym costs €119.
🎤 Political Conclusion: “Inflation is decreasing every year! Everything’s going well.”
🔍 Real Conclusion: Even though the inflation rate is decreasing, the gym price goes up, you still don’t go, and every year you’re fatter, older, and poorer.
⚠️ There’s more: focusing on core inflation (which excludes food and energy), the year-on-year change is 6.1%. Truly a concerning figure!
Why is it important? BTC is anti-inflationary, it’s one of its most attractive features (among others). The worse a country is hit by inflation, the higher the crypto adoption. Look at Turkey, where more than half of the population admits to using crypto. This anti-inflationary feature is one reason why many institutional investors are now massively entering the sector.
Observe this chart from Ecoinmetrics:
ETFs (regulated BTC investment vehicles) now control 800K Bitcoins, and that’s even before the SEC has begun accepting them as a legal instrument, something that might happen in the coming weeks…
It’s intriguing to see how the American and Ukrainian governments control 90k Bitcoins (seized during times when some naive individuals used this digital asset for money laundering and receiving payments from the dark web, as if there wasn’t an open and transparent record of all transactions in this crypto’s history😞😞).
DEFI protocols also occupy a significant market share, though we’ll likely see these positions grow in the coming years. And while we await the large influx of capital, exchanges where BTC and ETH can be purchased are drying up. As liquidity diminishes and users learn that self-custody is the only safe route, a perfect storm gradually builds up.
As we await the next halving, get your glasses cleaned and your popcorn ready.
Yours in crypto and AI.