Q9 Weekly | Familiar to Millions

Q9 Capital
7 min readAug 11


11 August 2023

  • US inflation edges up to 3.2% in July
  • Crypto volatility at a 6-year low
  • PayPal launches stablecoin on Ethereum, bringing crypto to millions

It’s CPI day again… and when you write an investment newsletter, it feels like these monthly numbers come out about once a week. This time, US headline inflation in July rose slightly from June (up 3.2%), a smaller than expected increase that supports the case for the Fed to hold interest rates steady at its next meeting in September.

The reaction in markets to the data was fairly solid with equities, bonds and crypto posting positive gains. The dollar receded as the chance of imminent rate hikes abated.

The monthly figures for both headline and core inflation were in line with expectations of analysts polled, while the annual figures were slightly below forecasts. Futures traders added to bets that the Fed will now keep interest rates steady, putting the likelihood of a pause at 91%.

Consumer Price Index, Year-Over-Year, Since 1965

Source: Bureau of Labor Statistics

Meanwhile, China has tipped into deflation. This poses the question: could China export deflation to the US and elsewhere?

In a note out this week, Ed Yardeni of Yardeni Research suggests that Chinese deflation may matter to US inflation. He points to how closely US and Chinese consumer inflation covaried before the pandemic (see chart below). As pandemic anomalies normalise, could the relationship kick back in?

Source: Yardeni Research

So, despite China’s “anti-crypto” pro blockchain stance, there’s a good chance that its economy will have a positive impact on token prices if it helps to cool global inflation and prevent further rate hikes in the US.

Welcome to the Summer Lull

Like most August’s, crypto has been awfully boring recently. Bitcoin volatility has hit a six-year low and crypto prices have held remarkably steady across the summer. This is often the case as summer holidays, the earnings season pause and lower trading volumes provide investors with a bit of a break. These periods of calm tend to gnaw away at impatient traders trying to play catch-up from gains missed earlier in the year.

Crypto Volatility at 6 Year Low

Source: CDI

Yet as fears of a deep recession begin to recede, inflation continues to cool, and Wall Street continues to pursue new crypto ambitions, we are all looking for the next catalyst to find some price action from September through to year end.

Open Interest Rises

Bitcoin’s open interest has surged as price hits two-week high. After several consecutive weeks of muted trading, BTC jumped 3.6% on Tuesday above $30k for the second time this month. Tuesday’s total aggregate open interest for BTC futures ballooned by more than $1bn from the day prior to $14.53bn, marking the largest increase in more than a month.

BTC Futures Open Interest

Source: Glassnode

Checking in on correlations across digital assets and traditional markets, we can see that over the past three months BTC and ETH have generally decorrelated from equities, foreign exchange and commodities, when compared with the Feb-to-April period. The strongest correlation to TradFi is now to fixed-income markets.

Just FYI, for the below correlation matrix: the upper right triangle shows May 1st to Aug 4th data; the lower left triangle shows Feb 1st to April 30th.

Source: CDI

HODLing for Longer

More than 13.3mn BTC worth $388.7bn have been dormant on-chain for at least a year, according to data tracked by blockchain analytics firm Glassnode.

The tally equals 68% of the circulating supply of 19.5mn BTC and shows a persistent bias for holding the cryptocurrency for long-term gains, although some of the inactive supply includes coins lost. The level hit an all-time high of 69% two weeks ago.

Holding Bitcoin More in Vogue

Source: Glassnode

The percentage of circulating supply inactive for at least two years recently jumped to a record 56%, with 40% inactive for at least three years. The increasing figure suggests a decline in the supply available in the market and the potential for a sharp price rally, assuming the demand side strengthens.

SOLdier of Fortune

Solana has captured market attention and now stands out among the L1s. Solana TVL has gained $37m within the last month. As of August 1st, the SOL price is up ~132% (YTD), it’s market cap has grown by $2b with a MoM gain of ~27%, and its TVL has gained $37m within the last month.

Source: The Block

Crypto’s New Best Pal

Fintech giant and payment processor, PayPal, has announced the launch of its own stablecoin (PYUSD), becoming the first major financial institution to push deep into crypto payments even as US regulators heighten their scrutiny of digital assets. PayPal customers will be able to purchase, send, convert and fund purchases in the coming weeks.

The dollar-pegged stablecoin will launch on Ethereum and is built in conjunction with Paxos. The digital token will be gradually” made available to PayPal’s customers in the US and will be launched on Venmo.

Optimists see it as a watershed moment of validation for blockchain and smart contracts, from a very serious fintech player. Plus, PayPal has over 430mn customers who will likely be bought into the crypto-sphere over the next few years.

Money Money Money

PayPal usually make money as a payment processor, but PYUSD will make money differently — from rates. Stablecoin issuers hold interest-bearing instruments such as T-bills with customer funds and give none of the yield to their customers. The issuer takes the spread… and thanks to rising interest rates, PYUSD has become a viable product for PayPal to pursue.

Higher interest rates across the world have greatly improved the profitability of stablecoin issuers. During the zero-interest rate era, stablecoin issuers had to either be content with minimal net interest margins or take on additional risk to generate a meaningful yield on deposits. Now simply deploying funds into short-term US government bonds can generate annualized returns of ~5%. As such, the profits of stablecoin issuers have shot up significantly.

Stablecoin transfers are also growing rapidly with more than $2tn in transactions in Q1 2023 alone.

Source: @Juan F. Leon

In theory, a PYUSD stablecoin could be spent without the underlying balance *ever* having to leave PayPal’s coffers. For example, a rent payment from a PayPal deposit currently has to be turned into real dollars to be sent to a landlord’s bank account. But the same landlord (or eBay seller, or whatever) might eventually be more willing to accept payment in PYUSD, then use those tokens in turn to pay contractors or other service providers.

This would mean a smaller proportion of PYUSD users would “cash out” to actual dollars at any given point, leaving PayPal a higher proportion of Treasury or other interest as revenue. Its status as a publicly-tracked blockchain token might even feed this dynamic, if enough users found that transparency more trustworthy than a simple number displayed on a web portal. Assuming we’re entering a period where interest rates will be higher for longer than over the preceding decade, this could accelerate the shift of PayPal’s revenue mix towards deposit interest earnings.

Although the stablecoin field is somewhat crowded, if PYUSD catches on, it could be at least as important to PayPal’s corporate strategy as it is to the crypto sector.,, and the new project will be bringing crypto to a huge demographic via a platform that is already familiar to millions. Expect this trend to carry on as more fintech and banking giants ape-in in the next few years.

In the News…



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