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Are Central Banks Running Out of Fire Power?

Email newsletter issued 4 Aug 2022 - Subscribe

Central banks continue to attempt to raise interest rates in order to combat inflation. On 27 July the FED raised rates by 0.75%, the second such increase in as many months. Today the Bank Of England raised their rates by 0.5%, the biggest rate rise in 27 years.

Despite this double whammy of bad news for risk assets such as crypto, we saw crypto markets gradually continue to rise over the period. Some are speculating that this is because the FED is already signalling that rate increases will be of limited duration. 

Whilst the rhetoric is around rates going up and up, the reality is that key central bank rates have been falling for 40 years as we can see below.

Even though central bank rates are increasing, they are not remotely close to the inflation rates we are now seeing. Inflation is currently 9.1% in the US, 8.9% in the Euro zone and 9.4% in the UK. That's if you believe the official figures, as many governments have adjusted their methodology for calculating inflation to make it appear lower. Shadow Stats put US inflation at over 12%, using the 1990 methodology. Some people think the true rate of inflation in the key global economies is closer to 20%.

Traditional economic wisdom would require interest rates to be raised above the level of inflation in order to get prices under control. We are not even remotely close to that level. Right now, the European Central Bank is fighting inflation of 8.9% with an interest rate of a whopping 0%.

40 years of economic insanity is starting to come to a head. The 2008 financial crisis was the first warning that the system was starting to creak. Since that date, governments and central banks have kicked the can down the road by maintaining rates at close to 0% and embarking on massive money printing programmes. The result is huge government debt piles, as well as massive corporate and personal debt.

Central banks can't raise rates by any significant amount as it causes the interest payments on government debt to increase exponentially. Rate rises also cause recessions. Even if you want to pretend there isn't a recession by changing the definition, these periods reduce economic activity and decrease tax receipts, placing the government under even more pressure.

Time after time, the central banks have threatened to keep raising rates before eventually backing off. In economic history, every time a government has faced a currency crisis and has had to choose between sound money or printing, they have always chosen to print.

So what does this all mean for crypto? Well, it looks like inflation is here to stay, and it also looks like the central banks are already hinting at running out of firepower. So it's possible that we'll see the banks easing rates later this year which will put some confidence back into risk assets such as crypto.

Meanwhile, the narrative around crypto as a hedge against inflation gets stronger. Crypto might be seen as risky, but keeping your wealth in fiat currencies and being guaranteed to lose 10 to 20% per year is also risky.

So here at DeFinda we are cautiously optimistic about the future for crypto prices.

 

BlockFi Rate Increases

Meanwhile, we are also starting to see signs of life in crypto yields. BlockFi has just increased its savings rates by 0.5% on large cap cryptos and by 2% on Uniswap.

 

We welcome any feedback, so please just email us at info@definda.com if you'd like to get in touch.

Matt & the DeFinda team

 

Best Instant Access Bitcoin Savings Rates

This week's best instant access Bitcoin savings rates. The table shows the maximum deposit that the rate is available for. Deposits above these levels will typically attract lower rates.
5.25% APY Up To 0.1 BTC Go
 5.2% APY Unlimited Go
   5% APY Up To 0.01 BTC Go
   4% APY Up To 1.077 BTC Go
   4% APR Unlimited Go
 3.5% APY Up To 0.1 BTC Go
   3% APR Up To 4.309 BTC Go
   3% APR Up To 1.293 BTC Go
 1.5% APR Unlimited Go
   1% APY Unlimited Go
0.25% APR Unlimited Go
View All Bitcoin Savings Rates

Highest Altcoin Yields

This week's highest yielding altcoins. These are highest yields we could find across all our listed crypto platforms.
30% APR Go
25% APR Go
23% APR Go
22.2% APY Go
20% APR Go
18% APR Go
16% APR Go
15% APY Go
14% APR Go
14% APR Go
Note: Whilst some coins offer high yield it is important to consider the price trend of the coin and its fundamentals. Yield income could be offset by a drop in the value of the coin.
View All Coin Savings Rates

Cheapest Crypto Loan Rates

This week's cheapest loan rates from the thousands of crypto loan products that we track. Use our loan calculator to fully explore available loan, collateral, LTV and term options. We have included just one example loan from AAVE, but AAVE offers many other highly competitive loan rates.
LTV Collateral Accepted Rate
50% 0.00166% APY Go
20% 4.5% APR Go
20% 4.5% APR Go
35% 5.5% APR Go
50% 6.5% APR Go
70% 7.5% APR Go
35% 7.9% APR Go
50% 7.9% APR Go
50% 9.75% APR Go
50% 12% APR Go
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Biggest 7 Day Crypto Price Movements

The biggest price increases and decreases this week across the top 100 cryptos. Change in price over the last 7 days shown.
Gainers Losers
Celsius logo CEL 59.1% Bitcoin Gold logo BTG -6.6%
Flow logo FLOW 59% Cronos logo CRO -5.2%
Decred logo DCR 30.8% Curve DAO Token logo CRV -4.2%
Zcash logo ZEC 28.9% Helium logo HNT -3.1%
NEAR Protocol logo NEAR 22.7% Lido DAO logo LDO -2.7%
Quant logo QNT 21.8% UNUS SED LEO logo LEO -2.1%
Chainlink logo LINK 21.4% Bitcoin SV logo BSV -2.1%
Mina logo MINA 21.3% Kusama logo KSM -1.8%
Oasis Network logo ROSE 19.3% Solana logo SOL -1.5%
The Graph logo GRT 19% Synthetix logo SNX -1.5%

Biggest 7 Day Movements Against BTC

The biggest 7 day price increases and decreases of the top 100 altcoins against bitcoin. This shows whether an altcoin has done better or worse than bitcoin over the last 7 days.
Gainers Losers
Celsius logo CEL 63.7% Lido DAO logo LDO -15.3%
Flow logo FLOW 60.4% Uniswap logo UNI -8.3%
Decred logo DCR 32.5% Bitcoin Gold logo BTG -4.6%
Zcash logo ZEC 29.7% Curve DAO Token logo CRV -4.6%
Oasis Network logo ROSE 26.8% Kusama logo KSM -3.2%
Chainlink logo LINK 19.1% BitTorrent-New logo BTT -3.1%
Mina logo MINA 19% UNUS SED LEO logo LEO -2.8%
Quant logo QNT 18.7% Helium logo HNT -2.6%
The Graph logo GRT 17.8% Bitcoin SV logo BSV -2.4%
Avalanche logo AVAX 17.4% ApeCoin logo APE -2%
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Important Message Definda does not provide any financial advice. All information is provided for research purposes only. DeFi is a rapidly evolving industry. Most businesses in the sector are very young and it is possible that some of them could go out of business in the future. Such an event could result in the loss of your investment. You should do your own research or consult a financial advisor before investing any money. Please read and satisfy yourself with our terms before continuing to use our website. We offer a free impartial comparison service of savings, loans and other DeFi products. We may receive a small commission from some of the companies listed, but this never influences our rankings. If you spot any errors in the information listed then please contact us at info@definda.com.

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