Others

Political crises – an opportunity for cryptocurrencies?

In the course of the massive losses posted last year, general interest in cryptocurrencies has waned noticeably. Neither this nor the sideways trend observed in recent months can alter the fact that the ardent supporters not only view Bitcoin & Co. as the future of money but also as a safe haven in uncertain times on the “traditional” financial markets. Economic and political factors can be seen as triggers for periods of significantly heightened uncertainty for financial market players in recent years. Concerns about a hard landing of China’s economy (mid-2015 and early 2016) and the US economy (early and end of 2018), and the unpegging of the EUR-CHF exchange rate in January 2015 can be grouped under the first-mentioned factor. The second factor includes the EU referendum in the UK (June 2016) and the presidential elections in the US (November 2016) and France (spring 2017). While there is no…

Brexit: A second referendum after all?

After much prevarication, Jeremy Corbyn as head of the Labour Party yesterday publicly came out in favour of a second referendum. His decision is not so much the product of his political convictions and more of strategic calculations: Now that several Labour MPs have quit the party and founded the “Independent Group” (TIG), Corbyn is under immense pressure to unite his party again. There are grounds for doubting whether his support for a second referendum will have the desired liberating effect on the logjam. Firstly, Corbyn must now face down those Labour MPs whose constituencies favoured exiting the EU in the original referendum. In 2016, there were no less than 72 Labour MPs in such constituencies. Although surveys suggest that many of the latter have since switched sides and favour ‘remaining’, there is still a significant number of Labour MPs (current estimates suggest 25) who will refuse to obey the…

Cryptocurrencies are plummeting – where will it bottom out?

What was lauded in many places as the future of money some twelve months ago now threatens to vanish into irrelevance. We are talking about cryptocurrencies here. While market capitalisation of all existing representations of such currencies amounted to around USD 835bn last January, only just over USD 120bn remains now – a decline of around 85%. Market leader Bitcoin came dangerously close to the USD 3,500 threshold at the start of the week. Going from the historical high of USD 20,000 in December 2017, the cryptocurrency pioneer has thus lost around 80%. The business model behind the respective cryptocurrency does not appear to be playing any major role in the price collapse. Ripple, the currency for the banks’ payment networks and the segment’s number two, eased by 87% compared with the highs reached at the turn of the year. The Bitcoin offshoot “Bitcoin Cash” slumped by as much as…

Cryptocurrencies & regulation: Trust bad, control better

Cryptocurrencies remain a buzzword on everyone’s lips. Whereas idealists see an alternative to the traditional monetary system, critics perceive a classic bubble building. In the view of representatives of governments, central banks and supervisory authorities, Bitcoin et al. are highly speculative, liable to be used for criminal purposes, and pose risks to the entire financial system. Accordingly, it is widely agreed that regulation is needed. At a national level, many regulatory decisions have already been made, extending from warnings to outright bans. And there is also evidence of progress being made on a cross-border basis. Nonetheless, this should not blind us to the fact that there is a huge amount of work to be done here: genuine international coordination is absolutely essential to well-functioning regulation given that “virtual currencies” are not tied to national borders. The European Union has emerged as something of a pioneer in the area of cross-border…

Debt levels in the emerging markets are rising further

The first half of 2018 was characterised by difficult conditions for the emerging markets. Even if it is not always possible to clearly distinguish between cause and effect, one reason for the scepticism was the strengthening of the US dollar relative to many emerging market currencies, which then essentially makes servicing the debt held in US dollars more expensive. The updated data released this week by the Bank for International Settlements (BIS) on US dollar debt held by countries outside the USA (non-banking sectors) provides interesting insights in this regard. According to the data, US dollar debts held by the emerging markets has risen from Q1 2017 to Q1 2018 by USD 292 billion to USD 3.68 trillion, meaning that the upward trend seen in recent years has persisted. Moreover, it is not just in the emerging markets that debt held in US dollars has increased, although the rate there…

The Brexit “White Paper”: a dead end

The long-awaited Brexit “White Paper” came out yesterday afternoon and was promptly torn to shreds in the subsequent debate in the House of Commons. The government has succeeded neither in keeping the Brexit hardliners happy nor in garnering the support of the advocates of a “soft Brexit”. From the viewpoint of the hardliners the deal is too “soft”, from that of the Remainers too “hard”. At the beginning of the week there had been hopes that the resignation of Brexit hardliners Davis and Johnson as well as the new push by the government would finally lead to the long-sought unity within the British government, but today there is no sense of unity left to be seen. The EU has not commented on the government’s proposal to date, but we suspect that it will have many (critical) questions. While the government’s fundamental approach, at least as intimated at Chequers last Friday,…

1 2 3 6