Crypto Currencies: Onward and Upward

Weekly Report - 20/05/2019

Cryptos Set Sail!


The rise of the Crypto Currencies in the face of deeply disturbing geopolitical and geo-economic news and its associated rhetoric is no longer surprising. The cryptos are moving into a different territory of assets from the solely speculative. They are not currencies yet, as they are not stable enough to be used as exchange media. Nonetheless, that they are acquiring safe haven tendencies is a step in the direction of long-term acceptance and utility.

The Week that was

Developments on two distinct fronts were at center stage in the past week. Escalation of the Sino-American trade war and the developments in the Persian Gulf. First the Trade war. Not only did tariffs rise on $200b of goods last Friday morning from 10 to 25%, but also the game took on a distinctly negative turn. The refusal of the US to accept Huawei products into the architecture and backbone of the 5G phone network rolling out around the world is well known. Yesterday however a new and disturbing layer was added. Google announced that they will no longer provide their operating system, Android, to the Huawei people for inclusion into their phones. Think about that for a moment. Huawei is the world’s number 2 producer of smartphones.

The Second development is the escalation rhetoric concerning Persian Gulf Oil distribution. Ship “sabotage” on two Saudi, 1 Emirati and 1 Norwegian flagged vessel and an “attack” by alleged Houthi armed drones on the Aramco East-West pipeline that runs form Al-Jubail to Yanbu on the Red Sea Coast. This is a major line with a 5m bbl/day capacity. The talk out of Washington and Teheran is alarming.


Main Focus this week

The world will focus on precisely the above two issues for signs of their gravitas. The Chinese have been relatively measured in their responses to the US tariff maneuvers. Largely because they are far smaller in the economic realm and, we feel, because there is more than a grain of truth to the US assertions that China is an underhanded trading partner, despite the US ham-fisted manner of addressing their gripes. Remember that this is not about tariffs or limited unfair trading advantages on particular products or industrial sectors. Rather it is a new cold war based on the long sought for reclamation of Chinese pride of place based on its undeniable economic, political, military and diplomatic ascendancy in the face of America’s decline. The battles we see playing out are between an ascendant and a tired, isolationist self-focused opponent. This conflict goes longer and deeper than the immediacies of tariffs and trading disputation.

In the Gulf, we are keeping our eyes sharply peeled for any action by the US. We are not concerned, at least with respect to the “sabotages” announced so far, as they seem trumped up and meant to serve as provocations. However, should the US take any sort of aggressive action at all, we anticipate oil spiking, sharply, and quickly. OPEC + meets today in Riyadh, and not their usual haunt of Vienna. The GCC meets later this week to line their ducks up and what we hear from both thus far does not sound conciliatory.


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