Liquidation of Evergrande Could Spark Global Crisis, Fueling Crypto Market Surge
China Evergrande Group, after failing to convince the court of its restructuring strategy to repay its massive debt, was ordered into liquidation on Monday, further worsening the real estate crisis in the world’s second-largest economy.
With the company’s value plummeting by over 90% in the past year, economists predict a difficult time for Evergrande investors, including banks, property buyers, and other real estate firms. Additionally, the Chinese government is already grappling with the impact of negative inflation, which stands at approximately -0.3%.
The impact of the Evergrande crisis on global markets cannot be overlooked. The company’s debt is more than four times larger than El Salvador’s gross domestic product (GDP) and equivalent to the debt of Chile, Romania, and Finland combined. Notably, Evergrande was a significant employer in China, both directly and indirectly, and now many have lost their source of income. Moreover, the company relied on building materials sourced from various countries worldwide, so there will be ripple effects on logistics as well.
It’s not just Evergrande that is facing financial troubles. Country Garden, another major Chinese real estate developer, is also in a precarious position. Reports from Bloomberg indicate that BlackRock, Allianz, Fidelity, and UBS all have exposure in Country Garden.
The collapse of Evergrande has served as a painful lesson for investors who favored real estate over digital assets like Bitcoin. Interestingly, one of Hong Kong’s leading fund managers, Harvest Global Investment, has applied to offer spot Bitcoin exchange-traded funds (ETF), suggesting a growing demand for digital assets in the region.
Despite the recent price correction that instilled fear in some, Bitcoin whales have been accumulating more coins. On-chain data reveals that around 67 new entities now hold 1,000 BTC or more, marking a 4.50% increase in just two weeks. This trend persists despite short-term price volatility caused by profit-taking from short-term holders and recent Bitcoin dumps by Grayscale Investments.
Tags: Bitcoin