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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 Staking Yields

This week's best instant access Bitcoin staking yields. The table shows the maximum deposit that the rate is available for. Deposits above these levels will typically attract lower rates.
DeFi 28.7% APY Unlimited Go
DeFi 19.3% APY Unlimited Go
DeFi   17% APY Unlimited Go
DeFi 15.5% APY Unlimited Go
DeFi 11.2% APY Unlimited Go
CeFi 10.5% APY Unlimited Go
DeFi   10% APY Unlimited Go
DeFi 9.11% APY Unlimited Go
DeFi 7.61% APY Unlimited Go
DeFi  6.6% APY Unlimited Go
CeFi    6% APY Up To 0.1 BTC Go
DeFi 5.83% APY Unlimited Go
CeFi  5.2% APY Unlimited Go
CeFi 4.47% APY Unlimited Go
CeFi    4% APY Up To 1.473 BTC Go
CeFi    4% APR Up To 0.1 BTC Go
CeFi 3.77% APY Unlimited Go
CeFi    3% APR Up To 5.891 BTC Go
DeFi 1.75% APY Unlimited Go
CeFi  1.6% APR Up To 1.767 BTC Go
CeFi  1.5% APR Unlimited Go
CeFi  1.5% APY Up To 0.01 BTC Go
CeFi 0.25% APR Unlimited Go
CeFi 0.193% APY Unlimited Go
CeFi 0.0388% APY Unlimited Go
CeFi 0.00004% APY Unlimited Go
CeFi     % APY Unlimited Go
View All Bitcoin Staking Yields

Highest Altcoin Yields

This week's highest yielding altcoins. These are highest yields we could find across all our listed crypto platforms.
3990% APY Go
1130% APY Go
483% APY Go
224% APY Go
218% APY Go
205% APY Go
186% APY Go
166% APY Go
159% APY Go
106% APY 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 Staking Yields

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% 0.00131% APY Go
20% 4.5% APR Go
35% 5.5% APR Go
50% 6.5% APR Go
70% 7.5% APR Go
50% 7.9% APR Go
50% 12% APR Go
25% 13.9% APR Go
30% 13.9% APR Go
33% 13.9% 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
Fantom logo FTM 33.1% BinaryX logo BNX -26.5%
GMX logo GMX 19.8% Curve DAO Token logo CRV -10.4%
Celo logo CELO 15.4% Convex Finance logo CVX -8.6%
EthereumPoW logo ETHW 15.1% Huobi Token logo HT -7.3%
Trust Wallet Token logo TWT 12.7% BNB logo BNB -7.2%
Uniswap logo UNI 12.2% KuCoin Token logo KCS -6.6%
Zcash logo ZEC 11.9% Helium logo HNT -6.4%
THORChain logo RUNE 11.8% Solana logo SOL -5.7%
Terra Classic logo LUNC 11.5% Nexo logo NEXO -5.7%
ApeCoin logo APE 11.2% Chain logo XCN -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
Fantom logo FTM 31.8% BinaryX logo BNX -25.8%
GMX logo GMX 18% UNUS SED LEO logo LEO -11.9%
EthereumPoW logo ETHW 13.6% Convex Finance logo CVX -10.7%
Celo logo CELO 12.3% Curve DAO Token logo CRV -9.7%
Trust Wallet Token logo TWT 12% BNB logo BNB -9.3%
Uniswap logo UNI 10.7% KuCoin Token logo KCS -8.9%
Dogecoin logo DOGE 10.3% Helium logo HNT -8.7%
THORChain logo RUNE 10.2% Chain logo XCN -8.3%
Terra Classic logo LUNC 10% Nexo logo NEXO -7.6%
Zcash logo ZEC 8.9% Solana logo SOL -7.2%
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