In the early days of the war, Trump said, “We have almost achieved our goals, it is too soon.” At this point today, we are heading towards completing the eighth week. Moreover, there is no definitive evidence of a permanent ceasefire this week. TKL analysts say that the energy crisis we are in is the biggest crisis in history. What about cryptocurrencies?
The biggest energy crisis in history
There has never been a crisis like this in history, with 600 million barrels of lost oil supply. US gasoline prices It’s up +47% since December and inflation is approaching 4% on a 1970s-like path. Moreover, we know that the increase in energy prices is not fully reflected in the inflation of other products. If the problem is not solved, things will get worse.
$50 billion worth of oil has been withdrawn from global markets. We can explain the size of the figure with the consumption of the world’s international shipping industry. The entire industry could operate these oils without any problems for 4 months, which is equal to 120 days of consumption.
Jet fuel prices in Europe have skyrocketed by over 100%. New data shows Europe has only 6 weeks of jet fuel left and many flights are about to be cancelled. Companies employ their employees just like Pandemic encourages people to work from home, as in the period.
“Asia is worst off as it is heavily dependent on the Strait of Hormuz. ~45% of all crude oil and condensate imported to Asia passes through Hormuz, the highest rate of any region. Asia is dependent on Hormuz for ~30% of its gasoline and naphtha imports, ~9% for diesel, and ~5% for jet fuel.” – TKL
Economy and cryptocurrencies
So what about cryptocurrencies? The answer to this depends on what happens to US inflation and the economy because interest rates have been high and policy has been tight for 4 years. Inflation needs to fall in order for the Fed, which is strangling cryptocurrencies, to loosen its hands, and while the decline that has been expected for years has begun, now things are turning around.
Energy inflation USA of the CPI While it accounts for ~7%, it also indirectly reflects in many other categories. Energy inflation in the US reached 287% on an annual basis last month, according to new data.
US CPI rose to 3.3%; this is the highest level since February 2024.
“Our models, USA CPI It predicts inflation will exceed 3.5% as early as next month. As a result, the UMich Consumer Confidence Index fell to a record low of 47.6. The global economy has changed.” – TKL
The probability of a Fed rate cut by July is only 22%, down from 90+% before the start of the Iran War. Just months ago, markets were predicting 3+ cuts this year. Now the basic scenario is that there will be no discount.
The US is dealing with compound inflation; 3%+ inflation is added to the already high inflation lasting more than 4 years.
Alright to cryptocurrencies what will happen? In light of all these details, there is little chance of inflation falling to 2%. In order to cut interest rates at the rate Trump wants, inflation must fall to 2% and a 25bp cut is predicted for the next 12 months. This means postponing the bull season that cryptocurrencies are likely to experience with the support of monetary expansion. If the war drags on and inflation rises faster (let alone if the war ends immediately and inflation declines at a slower pace), life for investors will become even more challenging.
