Week of Jul 12, 2022

The Start of Q2 Earnings Season Could Make For a Volatile Week

June’s Inflation Report.

Market Commentary 💬 



The U.S. dollar has been on an absolute tear. As inflation problems globally  turn into social unrest, investors are selling local currencies in favour of U.S. dollars. Additionally, uncertainty around the state of the European economy has caused the Euro to reach parity with the U.S. dollar for the first time in 20 years.

What’s also noteworthy is that interest rates for U.S. bonds have remained relatively stable since May, and the U.S. dollar index is about 5% higher than what it was in May. In other words, the real return of the U.S. dollar hasn’t changed much since May - meaning that the increase in demand is not driven by better risk-free returns, but by a flight-to-safety effect.

In some ways, this is good for the Fed - as a stronger U.S. dollar means cheaper imports, which puts downward pressure on inflation. However, the U.S. economy still seems to be doing quite well, as there are 2 job openings per every unemployed American looking for work. 

To the Federal Reserve, this means that the Fed still has “fiscal room” to increase interest rates. How much to raise could be determined by June’s inflation data due out tomorrow. 

Signs point to a potentially new record-setting reading. Anything above 8.7% would embolden the Fed to potentially raise rates by another 75 basis points in their next meeting on July 26th.

How could all of this impact bitcoin? 

A stronger dollar puts a headwind on corporate earnings as their overseas earnings take a big hit. This will likely cause some earnings guidance headwinds for U.S. companies, which could add pressure to equity markets in the weeks to come. 

Similarly, higher interest rates will also have an impact on company valuations and share prices, particularly to tech stocks, which have a higher amount of earnings out into the future, and therefore have to be discounted to the present at a higher interest rate. 

As we know, bitcoin has been correlated with equities over the last few months, and selling pressure in stocks could translate to selling pressure for bitcoin. 

The weeks between now and the next Fed meeting on July 26th could be quite volatile - and a lot will depend on tomorrow’s inflation reading. 

S&P 500

This week the spotlight will be on the start of Q2 earnings season for U.S. companies. 

Analysts have not revised earnings estimates since last year, and this quarter’s earnings could trigger a series of revisions and new price targets that could put additional pressure on equity markets. 

While this quarter’s earnings might be in line with expectations, it’s the forward guidance that could lead to some of the revisions. As stated in our Bitcoin section, a soaring U.S. dollar will likely impact the revenue guidance for the remainder of the year on most transnational companies. 

On the flip side, if earnings for the quarter disappoint _and_ we also get lackluster guidance, equity markets could be in a tough spot, as earnings underperformance could compound with increasing interest rates. 

This week we get to hear from 2 large banks, an airline, and the world’s largest semiconductor producer - which should give us a pretty good appetizer of what’s to come. 

With that, and a potentially record-setting inflation number due tomorrow, investors should brace themselves for some volatility ahead.



The payroll number made yields on U.S. treasury bonds soar last week, pushing the real return of the U.S. dollar higher. Inflation and uncertainty around parts of the world is also pushing U.S. dollar demand higher, making the U.S. dollar index soar. 

All of this combined to bring gold down -3.77% last week. 

The next catalyst for gold could be this week’s inflation reading. It should react favourably to a much higher than expected number. Remember, the real return of the U.S. dollar risk-free rate is the rate of interest of a U.S. bond minus the rate of inflation. Regardless of which bond maturity you use today, the real return is negative because inflation is at 8.6% and the highest yielding bond (30-year) is paying ~3.3%. 

While gold might benefit from a high inflation reading, the relief should be short-lived, as the Fed is on a mission to bring it down - and it is doing so by letting interest rates on U.S. bonds rise. Ultimately, this will put a lot of pressure on gold prices for the foreseeable future, unless inflation gets really out of control. 


Interesting development in the DeFi space in the last days, despite the sideways price action that continues to hit the main applications.

Aave, one of the main lending protocols proposed to its community to create a USD-pegged stablecoin:

The announcement comes as stablecoins are under intense scrutiny after the collapse of Terra's UST and Luna in May.

GHO, the new stablecoin project that still needs to be further discussed, audited and voted on, "would be backed by a diversified set of crypto-assets chosen at the users’ discretion, while borrowers continue earning interest on their underlying collateral", according to the governance post.

As can be consulted in Defillama, the DeFi space lost significant TVL volumes since its 2021 highs and specially after UST collapse earlier this year:

While these stablecoins remain in experimental phase and under pressure, this integration is being designed to facilitate Aave's growth within the Ethereum blockchain.


Related to Bitcoin mining, news came out yesterday that almost all major-scale Bitcoin miners in Texas had to shut off their machines due to the state preparing itself for a heat wave that is expected to push the TX’s power grid near peak demand. 

Over 1,000 megawatts were unloaded from the grid as Bitcoin miners responded to ERCOT’s (Electric Reliability Council of Texas) conservation request by turning off their machines to conserve energy for the grid. 

Miners such as Riot Blockchain Inc., Argo Blockchain Plc and Core Scientific Inc., include the list of impacted miners. Many companies picked Texas as a mining hub thanks to its low energy costs and Bitcoin-mining-friendly regulations. For now it's a wait and see situation, since miners will be allowed to turn back on their operations once demand has dropped.

What's Ahead


The value of most global currencies vs. the U.S. dollar is plummeting.

In India, the U.S. dollar has reached a record high vs the local Rupee.

In Japan, the Yen has reached its lowest level in 20 years:

The U.S. dollar also reached parity with the Euro for the first time in 20 years this morning:

A lot of Latin American currencies are also melting:

Now, I can only speak to my experience in Latin America, but life has taught me that the inflationary playbook is very similar among central bankers and politicians. 

Inevitably, it starts as a normal bout of inflation. However, local politicians will quickly start losing their grips as inflation turns into protests - (see Sri Lanka). 

In an attempt to prevent runaway inflation, most central banks will try to enact emergency interest rate  hikes, but these are most often futile in taming inflation or unrest - especially if this inflation is driven largely by sources outside of your control (i.e. a war in Russia). 

What will likely then happen is that politicians will start asking people not to “speculate” against their own currencies. 

These requests will also land on deaf ears because it’s effectively telling Colombians (or anyone else) that they can’t protect their savings. 

And so, governments may resort to capital controls - a flat out prohibition of exchanging your local currency into anything else (through the local banking system). Which pushes everyone to the P2P markets, and has the worst impact on the most vulnerable members of society. 

However, it is in these circumstances of deep despair and unfairness, that many people - like myself, found bitcoin. Bitcoin and stablecoins can provide a lifeline to people all over the world. 

World economies seem to be heading towards a hostile environment. Far from being a headwind, this is bitcoin’s time to shine.

To wrap it up, this week we get a potentially record-setting inflation reading,  the start of Q2 earnings season, and several Fed speeches:


Earnings: PepsiCo

6:00 a.m. NFIB survey

12:30 p.m. Richmond Fed President Thomas Barkin

1:00 p.m. $33 billion 10-year Treasury note auction


Earnings: Delta Air Lines

8:30 a.m. June Consumer Price Index

1:00 p.m. $19 billion 30-year bond auction

2:00 p.m. Federal budget

2:00 p.m. Beige book


Earnings: JPMorgan Chase, First Republic Bank, Conagra, Morgan Stanley, American Outdoor Brands, Cintas, Taiwan Semiconductor

8:30 a.m. June Producer Price Index 

11:00 a.m. Fed Member Speech: Fed Governor Christopher Waller


Earnings: Wells Fargo, Citigroup, PNC Financial, Bank of New York Mellon, U.S. Bancorp, State Street, UnitedHealth

8:45 a.m. Fed Member Speech - Atlanta Fed President Raphael Bostic

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.