Weekly SmartPills #62

Financial Markets

Cryptocurrency Market

Bitcoin experienced another volatile week, fluctuating between $95,000 and $98,000. Despite short-term corrections, the market remains bullish, with institutional investors continuing to accumulate BTC. Analysts point to upcoming macroeconomic data and potential regulatory developments as key factors influencing price movements. Ethereum, on the other hand, remains at the $2,700 level, fueled by excitement over upcoming network upgrades. The DeFi sector continues to expand, with growing adoption of Ethereum-based layer-2 solutions that improve transaction efficiency and reduce fees. Some analysts predict ETH may test the $3,200 mark in the coming weeks.

Traditional Financial Markets

Stock markets have shown signs of recovery after last week's drop. The S&P 500 has slightly rebounded, with the SPDR S&P 500 ETF Trust (SPY) up by 0.75% to $605.25. Microsoft (MSFT) has recovered some losses, rising to $415.30, while Tesla (TSLA) remains under pressure, trading at $355.84. In Europe, the FTSE MIB index reached 36,100 points, up 0.8% from the previous week, supported by strong performance in the banking and energy sectors.

Economics and Regulation

Donald Trump announced reciprocal tariffs to match import taxes on US exports, aiming to reduce the $1.2 trillion trade deficit. Targeting countries with large trade surpluses, including China, Mexico, and Germany, the move raises concerns of a global trade war and US inflation. The UK could face tariffs up to 24% if VAT is treated as a tariff. Calculations will consider VAT rates, existing tariffs, regulations, and subsidies. The UK government is taking a "wait and see" approach as negotiations are expected to follow.

The European Commission is planning a simpler, more focused long-term budget for 2028-34, shifting priorities towards security, defence, research, and the green transition. It proposes a European Competitiveness Fund and new revenue sources like customs duties and VAT contributions. Spain suggested doubling the budget to 2% of GDP and issuing joint debt, sparking debate over debt impacts. The proposal will be presented in July 2025, followed by negotiations with EU member states and Parliament.

Blockchain and Innovation

This week, we highlight Chainlink, a key player in bridging blockchain technology with traditional finance through its decentralized oracle network. Chainlink's latest initiatives focus on the tokenization of real-world assets (RWAs), enabling seamless integration of off-chain data into smart contracts. With growing institutional interest in tokenized assets, Chainlink is positioned to play a crucial role in the future of blockchain-based financial infrastructure.

Trends and Statistics

Electricity and Gas Prices Across Europe:

• As of January 3, 2025, residential electricity prices ranged from 9.1 c€/kWh in Budapest to 40.4 c€/kWh in Berlin, with an EU average of 25.5 c€/kWh.

• The lowest electricity prices were in Budapest, Kyiv (9.8 c€/kWh), and Belgrade (10.5 c€/kWh), while the highest were in Berlin, Brussels (38.5 c€/kWh), and Copenhagen (37.5 c€/kWh).

• When adjusted for purchasing power standards (PPS), electricity prices varied from 10.6 in Oslo to 43.9 in Prague, with Prague ranking highest in PPS despite being 7th in nominal prices.

• Residential gas prices ranged from 2.5 c€/kWh in Budapest to 33.3 c€/kWh in Stockholm, with significant disparities due to market-specific factors.

• In PPS, gas prices varied from 3.8 c€/kWh in Budapest to 28.3 c€/kWh in Stockholm, showing notable ranking shifts compared to nominal prices.