Weekly SmartPills #53
Financial Markets
Bitcoin continues to trade above $100,000 after last week’s historic milestone, supported by optimism over potential pro-crypto regulatory policies from the incoming Trump administration and Jerome Powell’s comments comparing Bitcoin to gold. The surge is fueled by institutional adoption, with ETFs playing a significant role in driving demand. Despite volatility risks, Bitcoin's market valuation remains robust, now exceeding $2 trillion.
The S&P 500 continued its positive trajectory, reaching new all-time highs. The index grew by 0.5% this week, while the Nasdaq increased by 0.9%. Remarks from Federal Reserve Chair Jerome Powell, highlighting the resilience of the U.S. economy, have bolstered positive sentiment. However, the VIX index, also known as the "fear gauge," shows signs of tension, suggesting a potential short-term correction. The technology sector has continued to benefit from growing enthusiasm for artificial intelligence, with Nvidia and Microsoft leading the way.
Economics and Regulation
The European Central Bank (ECB) has cut interest rates for the fourth time this year, lowering its main lending rate to 3%. The move aims to support the struggling eurozone economy, which is experiencing weaker growth than expected. The ECB's updated projections now forecast slower growth, with the economy expected to grow by just 0.7% in 2024 and 1.1% in 2025. Despite progress in fighting inflation, the ECB is focusing on boosting demand in the face of an economic slowdown.
Peru's central bank kept its key interest rate at 5% in December, despite rising inflation, with annual inflation reaching 2.27% and core inflation rising to 2.56%. The decision aligns with most analysts' expectations, as the economy is growing robustly after last year's recession. While the government has urged faster rate cuts, the central bank remains cautious, focusing on core inflation. Analysts anticipate potential rate cuts in 2025, as global challenges could impact growth.
Blockchain and Innovation
Ethereum has announced the launch of new updates aimed at making smart contracts more efficient and scalable. The implementation of proto-danksharding promises to reduce transaction fees and improve network performance, paving the way for broader enterprise adoption. This upgrade is seen as a response to the growing demands of decentralized applications (dApps) and competition from emerging blockchains like Solana and Avalanche.
Trends and Statistics
GDP Growth: 0.5% in 2024, 0.8% in 2025, driven by foreign demand in 2024, domestic demand in 2025.
Private Consumption: Strengthened by a better labor market, growing 0.6% in 2024 and 1.1% in 2025.
Investment: Slow growth in 2024 (+0.4%) and stagnation in 2025 (0%), due to fading fiscal incentives.
Labor Market: Strong job growth, reducing unemployment to 6.5% in 2024, and 6.2% in 2025.
Inflation: Sharp drop in 2024 (+1.1%), with a slight increase in 2025 (+2.0%)