Inflation Takes Center Stage - Valkyrie

Weekly Market Update from the Office of the CIO

Inflation Takes Center Stage

Inflation takes center stage this week as central bankers around the world meet to decide how to combat the now persistent rising cost of living. November’s consumer price index released last week rose to 6.8% from 6.2% in October, marking the highest indicator of inflation in close to 40 years. Core CPI, which excludes food and energy, rose to 4.9% from 4.6% during the same period, approaching levels not seen in 30 years. CPI was 1.4% at the end of 2020, with Core CPI at 1.6%. The Fed will meet this week and hopefully provide a transparent direction with interest rates ahead of the new year, in addition to indicating an earlier than expected end to the pandemic era stimulus programs.

For perspective, the US inflation rate of 6.8% is currently 6th among the G20 countries, with Argentina at 52.1%, Turkey at 21.3%, Brazil at 10.7%, and Russia at 8.4%. Euro area rate is 4.9%, with the UK at 4.2% and Japan last at 0.1%. All countries are experiencing historical rises and economists are hopeful for a synchronous solution in the short term.

Markets were sluggish last week after recovering from the prior week’s headlines related to the unemployment rate and rising covid cases related to the new variant. Equity indices remained in a trading range close to all time highs, with futures markets trending higher this morning on optimism that a fresh strategy to deal with inflation could be in place by end of week. The 10-year treasury rose to a recent high of 1.53% before backing down below 1.5% by end of week. Quiet morning so far today, waiting on the Fed meeting to start in a couple days.

Bitcoin has also followed the trend by trading within a range of $48k and $52k following a rise after the sell-off experienced last weekend. Sustained trading above $50k could lay a foundation towards $53k, a psychological level possibly lifting BTC to the $1 trillion market cap level. Fortunately, BTC has remained above the 200 day moving average level now at $46.7k, up from $46.3k early last week. Range trading is expected for the next couple days awaiting central banker decisions.

On-Chain Outlook

Long-term holders remain in an area of accumulation, maintaining a healthy on-chain structure solely from a long-term perspective. This has led to the supply of bitcoin held at reporting exchanges to drop to a fresh 3-year low, indicating spot demand. The cost basis for short-term holders is currently around $53,000, which is also a crucial level for bulls to reclaim as a level of previous support and current resistance.

Valkyrie in the Press

The Portfolio Management Team

Steven McClurg, CIO
Bill Cannon, Portfolio Manager
Wes Cowan, Portfolio Manager, Head of Defi
Sean Rooney, Head of Research, Trader
Will McDonough, Vice Chairman, Investment Committee
Leah Wald, CEO, Investment Committee
Shannon Smith, Head of Investor Relations