Monday, May 22, 2023

More layers of uncertainty, demonetization, BTC payments and more

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WHAT I’M WATCHING

• Looking kinda grim. Reaching an agreement on the debt ceiling is likely to be bad for markets. So is not reaching an agreement. And, the expected timing of rate cuts is getting pushed further out. More on this below.

• Safe havens. It seems that the market’s preferred safe haven at the moment is the US dollar, despite the likely hit to its reputation should the US default. This is hurting the traditional safe haven of gold, which is for now moving in line with BTC. More on this below.

• Demonetization. India is withdrawing its 2000 rupee note, in another example of centralized currency control raining inconvenience on citizens. More on this below.

• Bitcoin for payments. Strike, a payments platform that runs on Bitcoin and its scaling solution Lightning, is expanding its reach to 65 countries. The platform is apparently popular for its ease of use and low-fee transfers, so while it remains to be seen what kind of demand there is for its services in countries ranging from Antigua to Zambia, most of these countries do not enjoy robust digital payment systems on fiat rails, so there is less legacy resistance to overcome.

• Global tension. The Chinese government announced over the weekend that operators of key infrastructure could not purchase chips made by US-based

  Micron Technology. This is a blow to hopes that Chinese demand could soften the global economic slowdown, not so much from Micron Technology’s significance as from signs that trade is becoming more political. A trade war benefits no-one, and China’s latest salvo – coming hours after President Biden publicly talked about “improving relations” – represents another step in an unwinnable tit-for-tat.

MARKETS