Dispatch #176: State of the EU Economy

Jan 27 4 min read

Dispatch

In this patch of your weekly Dispatch:

Caution online 🚨
Clearing rumours 🤫
ETF dynamics 🌐

The Big Idea

We Need More of the Same

The recent approval of Bitcoin-related exchange-traded funds (ETFs) energized the crypto sector, if only for BTC to execute a classic switcheroo and give up its recent gains. The sell-the-news scenario has materialized, which prompted Dispatch to seek inspiration in other long-term endeavors. Like the EU's battle with inflation. Thankfully, the European Central Bank (ECB) has come out with the first major economic update for 2024. And since at Nexo we’re all about great rates, the central bank’s base one coupled with a pivotal speech from President Christine Lagarde is the big (idea) news.

Economic Outlook: The ECB expects average inflation to be around 2.7% in 2024, down to 2.1% in 2025, and eventually settling at 1.9% in 2026. Surveys from purchasing managers (PMI) show signs of a recovering economy – counterintuitively, declines in PMI readings are seen as positive, as they signal economic cooling. Lagarde pointed out that there might be a bit of a hiccup in the short term, suggesting a further slowdown in economic activity by the end of this year.

Inflation and Monetary Policy: Central borrow rates remain at a record-high 4.50% with more progress on disinflation needed before any rate cuts are considered. Geopolitical tensions and energy prices worldwide are seen as an upside risk to inflation.

Labour Market Dynamics: The labor market within the EU showcases a slight reduction in vacancies. Simultaneously, the wage tracker stabilizes, with hopes that wage increases will be absorbed by profits.

In simple words, we are stuck with the higher rates for now.

Ideally, the bets on the ECB committing to reduce rates, starting mid-2024, will materialize just as those predicting BTC’s sell-the-news price performance. This could potentially turn appetite for risk-on assets in the Old Continent up again. Until that becomes clear though, we’re HODLing.

The Latest In…

Careful with that Airdrop Email

Several online platforms, including major news outlet Cointelegraph, have issued alerts regarding phishing emails falsely promising exclusive token airdrops. Users are strongly advised to be cautious – refrain from clicking on suspicious links, and avoid connecting wallets to unverified sources.

Recent cyber attacks have exploited vulnerabilities in third-party email services, posing a potential threat to the security of digital assets within the crypto community. While Nexo prioritizes user security 24/7 above all, please be reminded to remain vigilant against phishing attempts, prioritize cybersecurity practices, and dismiss unexpected airdrops. Read more on how to improve the safety of your account on our blog.

The Latest In…

The SEC Ends the Rumour

Rumors of a spot ETF sequel, this time featuring Ethereum, have appeared following application sightings. Alas, this time, or for now at least, the crypto world will have to wait. SEC Chairman Gary Gensler left no one in two minds, citing the need “to designate a longer period within which to take action on the proposed rule change”.

The filings raise several questions for the public to consider, one of which explores the potential similarity between a spot Ethereum ETF and a spot Bitcoin ETF. Bloomberg analyst James Seyffart reckons a decision could loom in May.

The Latest In…

The ETF Saga: Asia Wants in

Hong Kong crypto exchange OSL anticipates the launch of the city's first spot crypto exchange-traded funds (ETFs) by mid-2024. Gary Tiu, OSL's executive director, revealed a potential debut of five companies by mid-year.
Investors in spot Bitcoin exchange-traded funds (ETFs) are flocking to lower fees, resulting in $21M in net outflows this week, according to CoinShares' report. Despite outflows, trading activity surged to $11.8B, seven times the usual weekly volume in 2023.
Regionally, the US saw inflows of $263M, while Canada and Europe together experienced outflows totalling $297M, indicating a slight shift of assets to the US, where fees are currently more competitive.

The Week’s Most Interesting Data Story

The Crypto Cap: Here Is Where We Are

The crypto market cap map serves as an excellent reference for the sector’s historical dynamics. Bitcoin has shown increasing dominance over the past few years, growing from 39% to nearly 50% since November 2022. In contrast, Ethereum's market cap dominance has remained stable, while altcoins and stablecoins have dipped, from 28% to around 24% as well as 14% to 8%, respectively.