GDP models flashing red

but it's not as bad as it seems - what does all this mean for crypto?

“Thinking is the hardest work there is, which is probably the reason so few engage in it.” – Henry Ford ||

Hey everyone, I hope you’re all surviving the rollercoaster of narratives and market moves!

Another late send, apologies again, it’s been a crazy day.

Below, I dive into the latest model-driven GDP predictions of a sharp US contraction in Q1. Are things as dire as they suggest?

Earlier today, I was a guest on Scott Melker’s Wolf of All Streets Show, you can see that here.

And the latest episode of Bits & Bips is out! James Seyffart and I talk to Steve Hou and Steven Erlich about strategic crypto reserves, macro mayhem, and more. You can listen here (Spotify link), or watch here.

Programming note: this newsletter has to skip publication on Monday, March 10^th.

IN THIS NEWSLETTER:

• GDP models flashing red

• But it’s not as bad as it seems

• What does all this mean for crypto?

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WHAT I’M WATCHING:

GDP models flashing red

Last week, I wrote about how unusual it was for the Atlanta Fed GDPNow model to output a number as low as economist consensus.

Well, since then, it has been revised further, and then some:

(chart via the Atlanta Fed)

This is feeding growing growth concerns that stem from slowing consumption, rising delinquencies and deepening tariff uncertainty.

That said, while it may look bad, it’s not yet reason for panic. Here’s why:

The GDPNow model takes a range of data releases (personal consumption, government spending, net exports, PPI, etc.) and plugs them into a model that spits out likely GDP growth based on actual data. It is not a forecast as there is no subjectivity; but it can miss looming impacts as its output is based on backward-looking inputs. This means it can underestimate certain influences; it also means it can overreact to historical data.

Over the past couple of years, it’s been both more optimistic and more accurate than economist predictions, which are often unconsciously suppressed in times of political uncertainty and in the aftermath of negative shocks.

Here, for instance, is a chart that shows expected vs actual GDP growth from the past couple of years: