Konza Newsletter #17
Big Banks Say a Recession is Just Around the Corner
Markets had another frothy week before rebounding sharply Thursday to salvage the losses after an above-expectations inflation print.
Starting with inflation, CPI came in at 8.2%, slightly above the consensus expectation of 8.1%. Core CPI (CPI minus food and energy) came in at 6.6%, the highest yearly gain for core since August 1982. With inflation appearing to be more pernicious than many expected after recent rate hikes, the odds of a dovish pivot are seeming less likely.
Across the pond, Europe continued its battle with inflation, with the Euro Area officially clocking a 10% inflation rate in September, above the consensus forecast of 9.7%. With concerns around energy use persisting, many European nations have backtracked on their “green” energy efforts to satisfy consumer and industrial demand.
Back home, asset managers and banks alike have decried the Fed’s rate hikes, stating that the continued pacing of rate increases is apt to send the United States into a recession in short order.
JPMorgan CEO Jamie Dimon warns that the US and global economy could tip into recession in the next 6 to 9 months.
Bank of America predicts unemployment will peak at 5.5% and hundreds of thousands of monthly job losses will likely begin early next year.
Ark Invest’s Cathie Wood writes an open letter to the Fed saying they are fighting inflation looking backwards instead of forwards, risking a deflationary bust.
With a Fed pivot not coming anytime soon, it will be interesting to see just how far these rate hikes will go and what the full ramifications of them will be. To continue bolstering our understanding of this developing situation, next week we will delve into another key aspect of the economy by examining the first and second order effects of the current environment on the housing market in the United States.
In Other News
We are only halfway through the month and October is already the worst month in 2022 for crypto hacks. Over $700 million was stolen from protocols this month so far.
The gig economy is being shaken up by a new Biden proposal that makes it harder for employees to be labeled as independent contractors.
Spain started the withdrawal process to exit the Energy Charter Treaty amid energy crisis.
Social Security cost of living adjustment slated to increase by 8.7%, the largest jump in over 40 years.
Mining Metrics
Bitcoin fell modestly this week as miner conditions continued to tighten. Hashrate continued its upward march and currently resides at a new all-time high of 263 EH/s. With block times falling below 9 minutes, the Bitcoin network had its biggest difficulty adjustment in 14 months, up a whopping 13.5%, continuing the miner squeeze of the last few months.
Hashprice, the signal of miner revenues per unit of compute, fell to under $.07, some of the lowest levels on record. Coupled with this descent, ASIC prices also continued to tumble, now off 17% from their mark just one month prior.
With Q3 earnings announcements just around the corner and operating conditions in a very tenuous state, we can expect another bout of restructurings and capitulations to be announced in the next 4 to 8 weeks.
Although much of the space is currently under great duress, the pace of development continues to be stunning. Luxor Technologies, the company that Konza utilizes for its hashprice and ASIC data, just released a derivative product that could be a game changer.
This OTC derivative allows for miners to begin offsetting market volatility by locking in certain mining revenues at the expense of potential upside. Should this marketplace gain traction, it will likely usher in a new era of derivative products to improve Bitcoin mining operations.