Week of Jun 7, 2022

Another look at U.S. inflation data this Friday

See you at Consensus in Austin this week!

Market Commentary 💬 



See you this week at Consensus! We will be in Austin participating in a panel discussing “The Ultimate Bitcoin Use Case: Enabling Activism” with Alex Gladstein from the Human Rights Foundation. It will take place on Friday at 4.45 PM CT. 

Last week Bitcoin broke its 9-week losing streak by closing higher +1.56%, just below the $30k mark. 

Markets in general have found some respite in the last week after more than 2 months of heavy selling.

The U.S. dollar has also been getting stronger over the same period, which has added downward pressure to asset prices in general (anything denominated in USD).

The strength of the U.S. dollar is on the back of rising interest rates for U.S. treasury bonds - as the interest rate on these rises, the real return on the U.S. dollar improves (real return is bond yield minus inflation). Currently, the yield on the 10-year note is sitting at 3.03% - while inflation is still north of 8%, making the real return of the 10-year bond around -5%. 

While a real return of -5% might not sound too enticing to some, considering the state of the market, the current uncertainty around commodity prices, and ongoing geopolitical conflict, it can make a lot of sense to some investors. 

In fact, the U.S. dollar has been the best performing asset year-to-date when compared to the S&P 500, gold, the Nasdaq, Bitcoin and the DeFi Index. 

Speaking of bond rates, the Federal Reserve is holding an interest rate decision meeting next week where investors anticipate they will announce another 50 BPS rate increase. 

As they do this, the real return of U.S. bonds will continue to improve, strengthening the U.S. dollar even more, which will put further pressure on asset prices in the weeks to come. 

However, there are signs that Bitcoin is starting to look attractive to some investors at these levels, and that could help bitcoin get decoupled from equity prices. 

Lyn Alden mentioned in a recent podcast with Natalie Brunell that at the current price, bitcoin was in a “value” range. As per Alden, this doesn’t mean the price can’t go lower, but to investors with a 5-7 year investment time frame and the right risk tolerance, the current prices could be a good entry point. 

Similarly, we are starting to see fund flows into Bitcoin funds for the last 2 weeks, and a dropping correlation with the S&P 500. Both of which are encouraging signs. 

First, let’s look at the flow of exchange traded funds:

As we can see, the last 2 weeks have seen inflows - with last week bringing in $100 Million in new funds. Most of them ($125 M) have gone into Bitcoin funds, led by Canada’s Purpose ETF with the highest inflows.  In the same week, $30 M exited Ethereum-based funds. 

Similarly, the 1-month correlation between Bitcoin and the S&P 500 has dropped significantly in the last 2 weeks, from a record high of 81% to currently at 43%.

All of these are encouraging signs for bitcoin, even as the current economic environment remains uncertain for the near term.

S&P 500

Global inflationary pressures continue due to the ongoing geopolitical conflict. 

To summarize the current situation - the prices of assets, goods and services have been increasing dramatically over the past 12 months due to a variety of reasons. Since the Fed can’t print more food or oil, it can only hope to tame prices by reducing the disposable income households and businesses have available - thereby curbing down demand. 

As an example, year-to-date, the yield on the U.S. 10-year bond has increased by +82%. In the same time period, Bitcoin is down -31%, the S&P 500 is down -14% and the Nasdaq is down -24.54%. The Fed’s plan is working as intended in this part of the economy so far.

The move is not having the same effect on commodity prices, however - and this can prove to be an issue for the U.S. economy down the line. 

Looking at commodity prices in the same time frame, all of them are higher - from copper to hogs. Oil, the “meta commodity” is up +54% in the same time frame. Keep in mind these are all priced in U.S. dollars, where the index itself is up +8% in the same time period. The inflationary impact from commodities is even worse in Europe and Japan. 

What does this mean? It means that the Fed may continue to raise rates all it wants, but it can’t do much about oil and commodity supply and transport disruptions because of the war. Without much to do, the Fed may have to continue tightening into higher fuel and food prices - which can prove costly politically. 



Gold has continued range-bound in the $1,850/oz range. As we have covered here, gold prices have an inverse relationship with the real return of the U.S. Dollar (bond yields - inflation) - which has been improving as of late, and looks poised to continue as the Fed is increasing rates while inflation seems to be rolling over. 


We are starting to see a large number of short liquidations around Ethereum as reported by Crypto Quant. 

As shown in the above chart, the last time there was a chart nearly as high was in the middle of a bear market rally experienced in May 2021. However, after dropping in price, the market did make a turn higher in the following months.


The next difficulty adjustment should kick in later today and is projected to bring difficulty down a touch by -1.29% to 29.4 THs. 

Transaction costs and speed remain pretty reasonable and the mempool remains clear.

What's Ahead

With the Federal Reserve meeting next week, and squarely focused on getting inflation under control, this Friday’s inflation data for May will get the spotlight. 

Inflation has so far peaked in March at 8.5%. April came in at 8.3%, and analysts (and the Fed) expect May to come in at 8.2%. If this is the case, look for markets to cheer in relief. While May’s inflation data alone won’t be enough to change the Fed’s plans to raise rates next week, it signals a step in the right direction based on their stated outcomes.

With lower inflation also comes higher unemployment. This may not seem like a problem just yet, but cracks should start to appear in the labour market any time now (see recent layoff announcements by several large companies). 

We hope you enjoyed reading and as always, we wrap up with a summary of the upcoming economic data and earnings reports for the week:


8.30 AM EST - Initial & Continuing Jobless Claims in the U.S.


8.30 AM EST - U.S. Core Inflation for May

8.30 AM EST - U.S. Consumer Price Index for May

It's a big week coming up, and as always, we'll keep you posted on any relevant news throughout the week right here and from our Twitter account.


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About the author

Mauricio Di Bartolomeo

Mauricio is the co-founder and Chief Strategy Officer of Ledn.io. He grew up in Venezuela where he and his family learned about Bitcoin. Now based in Canada, Mauricio holds HBA and MBA degrees from the Richard Ivey School of Business in London, Ontario in Canada.