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Highest CPI in a generation and bitcoin up 5% this week

Increases on new house prices, fuels and furniture drove the CPI higher. At the same time, returns on bitcoin hashing are so meager that investors may be driven to invest directly in the asset again.

New house prices, fuel and furniture dominated the CPI, which hit 7.3% (year-on-year).

The Australian Bureau of Statistics reported year-on-year inflation for the third quarter of 2022. This figure, 7.3%, is the highest since 1990 when Australia entered a severe recession.

The annual CPI change, reported quarterly, has been rising steeply since mid-2020.

The Australian government, like many others, has been raising interest rates in an attempt to subdue inflation. Earlier this month, these were increased by 250 basis points to 2.6%.

Despite austerity measures including higher interest rates globally and transitions to quantitative tightening, including by the RBA, the exchange rate for bitcoin rallied this week, by over 5%, to trade just shy of $32k AUD.

The hash rate, a measure of resources dedicated to securing the blockchain, reached a new all-time high this week of 270 EH/s. Metrics, including the Puell Multiple (below), illustrate that returns for hashing (or “bitcoin mining”) are at historic lows. Such conditions have historically aligned with excellent entry points for investment in bitcoin.

Revenue for hashing, or bitcoin mining, is at historic lows. At the margin, this may redirect investment in bitcoin away from hashing infrastructure and toward accumulation of the asset itsself.

The Reserve Bank of Australia will present their interest rate target on Wednesday, next week (1 November). It is expected to rise by 250 basis points to 2.85%.

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