Welcome back everybody. It’s been another exciting week in crypto and we’re pleased to bring you the next edition of The Blockchain Review. The holiday season has arrived and 2022 will soon be drawing to a close. We’ve all had a turbulent year and are still in the depths of the crypto winter. It’s been a total contrast to 2021, but it’s always worth remembering the cycles and roughly where we are within them.

We’re in the middle of the Bitcoin halving cycle and the middle of a macro cycle. This is the first crypto bear market where the global economy has also been in a bear market. We’ve looked a lot at the interest rate decisions of the FED this year because for most of it Bitcoin and crypto prices were correlated with US stock markets. 

There was a time when Bitcoin was meant to be a hedge against inflation but it hasn’t panned out like that for people who’ve entered over the past couple of years. The next halving will take place in around 500 days. So in April/May 2024 the block reward will reduce from 6.25 to 3.125 BTC per block. In future cycles it may still become the hedge and Bitcoiners will always remind you that there’ll only ever be 21 million Bitcoins.

As for the global Macro outlook, there’s decades of data available on economic cycles here and the FED is very regularly vocal on the role they play in economic cycles. They have a set of tools which they use to control money supply and their often stated prime objective is a 2% inflation target. There’s a range of opinions on when they will make the pivot, but most forecasts are between Q2 and Q4 2023.

Because the US$ plays the role as the world reserve currency, with around 60% of the world’s foreign exchange reserves being held in US$, the monetary supply, controlled by the FED, has large influence over other markets. For much of this year the dollar became the safe haven, when during this part of the cycle, money flowed away from risk assets and into the so-called safe haven. 

The FIAT bubble actually gets bigger each cycle and each round of quantitative easing.  If, for any reason, confidence in the dollar (and the US) decreases as a global reserve asset this bubble would be under threat. Think of all the deleveraging that’s occurred this year in crypto and put that on a global scale. But for the time being they can’t just stop the money-printing or the global economy would collapse. 

So bar any global catastrophes or revolutions the global economy will enter the next cycle of quantitative easing. Look for the inflation numbers to come down to reach the interest rate in percentage terms before any change in policy. For reference the most recent CPI data came in at 7.1% and the current FED interest rate is 4.50% with implied expectations of a peak at 5%. When the numbers cross, look out for the pivot and it could well time with the buildup to the next halving!

Wherever you are, I hope you have a fantastic holiday season. No matter what’s happened in the industry this year, just make the most of enjoying time with the people who are most important to you!

We’ll always provide you with our research to help with your education. We’ll keep close track of the main developments and evolution of the niches in blockchain so that you get the best of the new knowledge. When you’ve finished reading your report then please remember to fill out the feedback form, your research is valued and we’re always open to suggestions.