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3 min read

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Cryptic ball: inflation hedge?

What a day! As mentioned Tuesday, the public was due new US inflation data today. It came out at 1h30pm UTC, showing a 0.6% increase since December and is a 7.5% year-on-year increase since last January. The media went wild as this was the highest read since 1982, but it was just 0.3% above analyst expectations. Bitcoin fell 2.5% in 5 minutes, which is a huge drop, further falling up to 4%.

But bulls were well-rested and bought the dip within the hour, even printing a new yearly high at $45.6k! Why is this? Well, today's chart art comes from Vetle Lund, an analyst at Arcane Research, an outlet I like to follow, and visualises bitcoin's basis in futures markets. It shows us the difference between the price of a futures contract and the spot price on a rolling rate to avoid expiry discrepancies.

Overall, a rising basis with rising prices indicates strength in a market, as spot prices are leading and rising faster than futures - showing real demand. So it's interesting to see the CME futures basis is leading this rise, hinting that institutions are back accumulating corn. While this relationship can be damaged by arbitrage traders, it's at least worth considering - even if only for hopium. Fortunately, Vetle Lund argues there are real flows behind this move.

Chart art: institutions hedging?

Read today's post for more on this chart. Onwards and upwards!

Three things: hedge your risks.

Tweet tip: hedge your algos.

Inflation is priced in.

Meme moment: hedge your biases.

For all the students out there!

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Our newsletter offers opinions and insights from analysts in the cryptoasset space. It is not intended to be investment advice, and should not be treated as such. You must not rely on its information as an alternative to financial advice from a qualified professional. Without prejudice, we do not undertake or guarantee that its information is correct, complete or non-misleading; or that the use of guidance in the report will lead to any particular outcome or result.