Weekly SmartPills #63

Financial Markets

Bitcoin continues to hold above $90,000 despite the hack that hit Bybit this week, with an estimated loss of around $1.5 billion in Ethereum. The attack occurred during a transfer from a cold wallet to a warm wallet, raising concerns about the security of centralized exchanges. However, the market has shown remarkable resilience thanks to institutional adoption and the growth of ETFs. Ethereum and other altcoins have seen limited movements, as investors monitor upcoming regulatory developments in the United States.

The S&P 500 gained 0.4% this week, while the Nasdaq rose 0.7%, supported by positive macroeconomic data and a rally in the tech sector. Fed Chair Jerome Powell reiterated that rate cuts may only come in the second half of 2025, partially cooling investor enthusiasm. However, markets are showing signs of tension, with the VIX index slightly rising. Attention remains focused on inflation data and the European Central Bank’s upcoming decisions.

Economics and Regulation

French lawmakers approved a 2% wealth tax on the super-rich, proposed by the Ecologist Party, though it is unlikely to pass the Senate. The "Zucman tax" targets around 4,000 individuals with assets over €100 million, aiming to generate €15-25 billion annually by closing tax loopholes. Supporters argue it tackles inequality, while critics, including Budget Minister Amélie de Montchalin, claim it would harm investment and job growth. President Macron has historically favored pro-business policies, reducing corporate taxes and replacing the ISF wealth levy with a real estate-focused tax. Despite reforms, a 2023 review found no significant shift in investment patterns.

Bank of Italy Governor Fabio Panetta warned that the eurozone’s economic weakness is lasting longer than expected, with no recovery driven by consumer spending. After two quarters of stagnation and pressure on manufacturing, the labor market is showing signs of weakening. He noted that declining bank loans are mainly due to weak demand but emphasized concerns over prolonged credit reduction. Panetta highlighted the importance of ensuring access to credit for small and mediumsized enterprises, which play a key role in Italy’s employment.

Blockchain and Innovation

Ethereum continues to innovate with EigenLayer, a protocol that introduces the concept of restaking, allowing users to reuse ETH already staked to earn additional rewards. This mechanism has attracted growing interest and could play a key role in the security of dApps. Despite its potential, EigenLayer's model also introduces new risks, including increased exposure to slashing. The Ethereum community is closely monitoring its development and the potential impact on the DeFi ecosystem.

Trends and Statistics

• Italy’s Economic Outlook 2024-2025:

• GDP growth: 0.5% in 2024, 0.8% in 2025. Key drivers: 2024 growth led by net foreign demand (+0.7 p.p.), while 2025 will be driven by domestic demand (+0.8 p.p.).

• Consumption & investment: Household consumption growth at 0.6% (2024) and 1.1% (2025); investment growth slows to 0.4% (2024) and stagnates at 0% (2025).

• Labour market: Employment (FTEs) grows 1.2% in 2024, 0.8% in 2025; unemployment drops from 7.5% (2023) to 6.5% (2024) and 6.2% (2025).

• Inflation: Household spending deflator falls from 5.1% (2023) to 1.1% (2024), rising slightly to 2.0% in 2025.