Bitcoin Made 2018 Low, China Is the Banker & US Should Understand

Talking Points:

Regulators are haunting cryptocurrencies.
China says it is only diversifying its options.
Tesco needs to have better suppliers.

Bitcoin price made another low on Thursday for 2018, thanks to South Korea’s Justice Minister. It is another bad day for cryptocurrencies and once again the news which is hitting the cryptomarket is on the regulatory. According to South Korea’s Justice Minister, the country is busy in preparing a bill which will ban all cryptocurrencies trading. His stance towards digital currencies seems to be far-fetched given the market cap of South Korea’s cryptocurrency exchanges. Yes, the price of bitcoin in South Korea pride at a premium of around 30 percent and developments like today are designed to reduce that premium. We do think this is what the regulators are trying. Banning cryptocurrencies altogether would be difficult given that the country is one of the biggest market in the world especially for bitcoin and Ethereum.
It is important to keep in mind that this is not the first time that the regulators have gone after the cryptocurrency market. During this week alone, we have seen two headlines emerging from South Korea aimed at Bitcoin by using the regulatory tactic. There is no doubt that the demand for Bitcoin in South Korea is massive and some elements of the public behaviour (when it comes to trading the cryptocurrencies) aren’t far from gambling habits.

Nonetheless, traders should not read too much into the South Korean situation because even once the bill is drafted, it would require a backing of 297 members of the National Assembly, a process which could easily take months or even years.

China and US treasuries

China has reduced their purchase of US treasuries’ was the news which crashed the prices of the US Treasuries and pushed the dollar index lower yesterday. But the Chinese officials clearly labelled this as fake news and assured markets that China is only diversifying its options. We do know that China is the largest buyer of the US Treasures, and if there is any reduction in the Chinese appetite for the US Treasuries, it would have serious consequences for the global markets.
In 2018, the US is looking to boost its debt supply significantly and without the Chinese demand for the US Treasuries, the situation would have a different outcome. The US extending its hand of friendship towards Taiwan does make the situation more arduous (China and Taiwan are old rivals). Therefore, the underlying message should not be neglected; the US should tread very carefully. China is currently holding 1.2 trillions of US debt and it has the ability and power to jolt the US markets. President Trump should think more seriously towards the Chinese trade surplus situation. Every action would have its consequences, whether it is geared towards how China is dealing with a North Korean nuclear crisis or something else. China is certainly not tied under any agreement to buy US bonds and the message is clear that there are other debts which the country can always look to buy.

Tesco Disappoints

Christmas sale was disappointing, that is the message from the U.K.’s biggest grocery retailer, Tesco. Weeks leading up to Christmas were the most important ones and the firm had a major problem with its supplier, Palmer and Harvey. The company did experience a 1.9 percent rise in like for like sales (3Q LFL sale; Act, 2.3%, Est, 2.4%). However, looking at competitors such as Sainsbury and Morrison, both have beaten their forecast for Christmas trading. This doesn’t put Tesco in a strong position at all. The retailer which dominates the British High Street needs to make sure that it keeps its tools sharp to fight inflationary pressure by keeping the prices low. There is no doubt that Tesco has turned the corner and avoided a Debenhams style disaster but it needs to make sure that it stays on track to deliver on its medium-term ambition. This is mainly because the competition is fierce in this space and discounters such as Lidl and Aldi have performed extremely well. Lidl’s Christmas sales increased by 16% and Aldi saw 15%.