As the crypto market slumped on Monday 20th September, some are saying that it’s the imminent collapse of China’s largest property developer Evergrande causing a Bitcoin slump, with the king of crypto dropping over 6.5% in the last 24 hours.
What happens with Evergrande is notably about what the Chinese government will do next, as the Communist regime is more plugged into it’s big companies than just about every other major world government. What the communist party wants, the communist party gets effectively, and the government has already said that Evergrande cannot meet it’s debt obligations.
Furthermore, Chinese state backed news media is saying that the company should not rely on a bailout from the government. So will the CCP allow the company to fail, and if it does will this mean Evergrande causing a bitcoin slump the likes of which we haven’t seen before?
Evergrade is now the world’s most indebted property developer, owing more than, wait for it $300 Billion (yes Billion, that isn’t a mistake) to creditors, many of whom have been protesting outside the companies headquarters.
The notion that what is happening in the Chinese markets is affecting the entire world (and not just the crypto world) isn’t just FUD. China has had double digits growth for many years, mainly fuelled by its focus on manufacturing of cheap goods, which it has exported across the globe.
In 2019, initial coin offerings (ICO’s) were banned by the Communist regime, which further intensified its crackdown on Crypto this year by banning Mining as well as stopping financial institutions and payment companies from providing crypto transaction services.
Not just Evergrande causing a Bitcoin Slump
It’s not unusual in the crypto world to see large drops, as well as huge rises. Cryptocurrency is notoriously volatile, and a 6.5% drop in one day isn’t really massive in the Bitcoin world.
Back in June 2011, Bitcoin in its infancy went from $2 to $32 before the Mt Gox exchange was hacked, with millions of dollars of Bitcoin being stolen. In a single day, the price of Bitcoin slumped 99%. The following year, Bitcoin shed 56% of its value in one day, and the year after, in April 2013, Bitcoin’s price dropped over 83% as intense trading shut down exchanges.
December 2017 saw the start of the long crypto winter, with 84% being wiped off the price of Bitcoin on the 27th of December, whilst many in the west were enjoying the Christmas break, with the price cratering from almost $20,000 down to below $12,000.
Let’s also not forget 50% drops in March 2020 as the Pandemic started to bite in Europe and the America’s, and the trillion dollar drop in May of this year after BTC reached a new all time high of over $64,000 with many are still blaming Elon Musk’s tweet trashing Bitcoin for it’s environmental impact for that drop, but a multitude of factors seemed to be in play.
If Bitcoin does continue to descend down, it’s clear that it won’t be the first time, and obviously it wasn’t Evergrande causing a Bitcoin slump back in those days.
Wider Market affected by Evergrande collapse… but is it more than just one Chinese company?
At the time of writing, across the board there’s blood in the water today, with Futures contracts getting particularly well souped. S&P 500 futures dropped 1.3% whilst Nasdaq futures shed 1.06% of their value.
However, it’s worth pointing out that the world’s financial markets are on the brink of an imminent market collapse according to many analysts, and it’s so obvious to see, with even the occasional nod to the possibility in the mainstream media.
Massive government spending (especially in the US, and some of the world’s other notable economies, including those in Europe) and the printing of money like it’s gone completely out of fashion has led some to the idea that some of the principle economies (including the US Dollar) is about to experience hyper inflation, the likes of which we haven’t seen before. If this happens, the 2008 market crash is going to look like a picnic, and the ramifications will be seen throughout the world, as the economic shockwaves of the world’s reserve currency collapsing will affect everything, and that includes the crypto market.
However, crypto, and Bitcoin in particular has long been seen as a hedge against a failing financial system, but the key difference this time is the ridiculous amount of institutional and corporate money which has been piling into the crypto markets over the last year or so.
Furthermore, and this is one factor that shouldn’t be discounted, is the theory that governments are doing everything they can to destroy Bitcoin, and crypto in general, so as they can usher in their own controlled Central Bank Digital Currencies (CBDC’s). Whilst this idea some might say is a bit of a fringe “tin foil hat” concept, it’s not beyond the realms of impossibility. Governments, especially repressive ones, love power, and Bitcoin has allowed people from all over the world to effectively unplug themselves from much of the traditional banking industry.
Is it possible therefore that the Chinese government is going to allow Evergrande to collapse in spectacular fashion, triggering massive and widespread effects on ALL economies, and allow central banks to usher in a new ‘utopian’ dream of centrally controlled digital assets which are forced on their populations? Well, all this author can say is that it’s worth remembering the scariest thing ever is the knock at the door and the guy says “hey, I’m from the Government, we’re here to help…”
It’s fair to say, therefore, that whilst Evergrande causing a Bitcoin slump is not the entire picture, it’s certainly a part of the overall conditions which could indeed trigger a massive selloff.
NB: This is not financial advice, always do your own research.