Summary

The announcement of new CPI data on Wednesday showed a 8.3% increase in consumer prices from April 2021, 20bps over estimates. The real concern is the steadily increasing Core PPI which is a leading indicator of CPI.

10-year Treasury yields have fallen slightly this week hinting at a potential bounce in the fixed-income bear market, as of Friday morning equities are attempting to follow suit.

The Nasdaq Composite and S&P 500 have been extremely oversold, increasing the likelihood of a short-term rally before a probable third leg down.

Bitcoin transaction fees saw yet another huge jump this week. Pending transaction fees in the mempool reached a level not seen since May 2021 due to Binance UTXO consolidations.

Bitcoin is approaching a potential inflection point where old-generation mining rigs like S9s may become unprofitable even at competitive electricity rates. If the price falls further and these rigs turn off, mining difficulty could adjust down, making new-gen rigs earn more BTC.

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With the selloff this week in equities and cryptoassets, it’s not much of a shock that crypto-equities have generally have had a very poor week.

BTC is approaching the 200 week moving average, sitting at $22K.

The confluence of these indicators and price levels signal that Bitcoin is becoming deeply oversold. We aren’t calling the absolute cycle bottom yet, but are getting awfully close and expect these levels to be seen as great buys looking back in 2-3 years.

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Bitcoin Mining

As of Wednesday, there was 14+ BTC worth of pending transaction fees sitting in the mempool waiting to be mined by miners.

Mempool chart [Larger image]

Because of this increase in network difficulty, breakeven prices have risen. Since the price has dropped as well, miners have inched closer to their higher breakeven prices and margins are being compressed for everyone.

We are potentially on the cusp of a small miner capitulation.

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