The On the Margin newsletter by Blockworks.co provides insights on various topics such as predicting Fed policy, bitcoin miners entering AI, BTC’s rebound, and its correlation to equities. In terms of Fed policy, the focus should be on unemployment rather than inflation, as inflation is expected to remain around 3% due to lagging factors like Owners Equivalent Rent inflation. The unemployment rate is expected to rise slightly to 4.2% by 2025, making it a crucial factor for Fed decisions.
The Sahm rule, created by former Fed economist Claudia Sahm, serves as a real-time indicator of recession risk based on unemployment rate trends. Currently, the rule is at 37bps, and if it reaches 50bps, it could trigger a shift in Fed policy towards easing. This indicates that the bar for easing based on employment is low, compared to inflation. Therefore, investors should focus on unemployment trends to understand the Fed’s potential moves in the future.
On the digital transformation front, only a small percentage of surveyed bank professionals have fully transformed their data systems, with many banks still in the early stages of catching up. While traditional banks like JPMorgan and Citibank are exploring blockchain technology, neo-banks and the crypto world are setting new standards for innovation through next-gen products and efficient back-end processes.
When it comes to trading BTC, investors should not rely on stock market trends, as BTC’s correlation with stocks has been on the decline. The recent drop in BTC prices has made traders nervous, leading to panic sells and liquidations. Instead of stocks, investors can monitor bitcoin’s funding rate, which has turned negative in recent weeks. Past instances of negative funding rates have preceded BTC price hikes, indicating a potential rebound in the future.
Bitcoin miners are increasingly focusing on the HPC/AI vertical, with companies like Hut 8 and Core Scientific securing funding and expanding their operations in this area. Despite new opportunities in AI, both companies remain committed to bitcoin mining while exploring growth opportunities in parallel. The market approval of these moves is reflected in the stock prices of these companies, signaling a positive response from investors.
In the cryptocurrency market, US spot bitcoin ETFs have experienced net outflows for seven consecutive trading days, totaling $1.1 billion over the span. While BTC’s price briefly fell below $60,000, it was above $61,400 at 2 pm ET on Tuesday. Ethereum has been experiencing its longest inflationary period, with ETH’s circulating supply steadily rising for almost 72 days. This trend in ETH inflation should be monitored by investors for potential market impacts.
