Macro news still continues to drive markets. Europe is at the center in early September. At the end of August, Europe’s inflation soared to another record this year at 9.1%. This increase is largely due to ever-soaring energy and food prices. A week after the release of inflation data, the ECB raised interest rates by 75bps which raises its base interest rate to 1.25%, still far off from other countries, such as the US or the UK. A recession in Europe is getting more and more likely with such announcements. This threat is especially high for the UK, as Goldman Sachs expects the recession to start in the UK in the fourth quarter. The UK faces the same issues as Europe does, but at an elevated pace. UK’s inflation is higher than 10% while the BoE has raised interest rates significantly more this year already. While the current base rate is only marginally higher at 1.75%, another decision in early September was delayed following the passing of the Queen last week. The weak currencies are another issue. Both, the Euro and the British Pound, are exceptionally weak compared to the US Dollar historically. In the US, the situation seems a bit more stable. Last month, the US managed to re-employ all people fired during Covid-19, and the country continues to employ more people, leading to a record low unemployment rate. However, markets are still heavily pressured by the hawkish Fed. The board emphasized that they are strongly committed to bringing inflation down soon rather than later. Markets widely expect at least another 50bps if not a 75bps hike in the next meeting. Another major development takes place in the cryptocurrency market. “The merge” of Ethereum (ETH) will be executed around the 15th September 2022. Essentially, the merge refers to the combination of the ETH main-chain and its side-chain, known as Beacon chain (launched in December 2020). The main-chain is based on the PoW (Proof-of-Work) consensus algorithm, whereas the Beacon chain uses PoS (Proof-of-Stake). The difference between the two validation algorithms is the resulting energy cost. PoW uses computational power to validate the network. In this approach, all computers try to validate a transaction, in which the fastest is rewarded. Unsurprisingly, this leads to a lot of unnecessary energy consumption. PoS also uses computational power to validate transactions but it bundles the computers together and everyone gets a fraction of the reward. This prevents energy consumption for nothing and leads to an energy consumption decrease of more than 99.9%. Figure 3 summarizes the timeline of the merge. While it is unlikely that there will be a large move in ETH immediately after it takes place (assuming it works well), such events have historically been followed by strong performances of the underlying chains. One example is the introduction of the Beacon chain in December 2020, after which ETH rose from $400 to almost $4,000 in less than six months. Cryptocurrencies were relatively stable and gained slightly over the past weeks. Bitcoin is currently trading at $22k and ETH is valued at $1,750.