Chinese real estate company Evergrande must meet an accumulated debt of more than USD 300,000 million. The market capitalization of cryptocurrencies in general recently fell from USD 2 trillion.
The overall market capitalization of cryptocurrencies recently dropped to USD 1.87 trillion, reflecting an 11% drop in 24 hours. The total value of that fall was USD 255 billion, which coincided with that of the rest of the markets. That event may have been due to the crisis at Evergrande, one of China’s largest real estate companies.
The total market value dropped below USD 2 trillion for the first time since August 19th. The price of Bitcoin fell from USD 47,224 to a low of USD 42,728, a 9.52% drop in 24 hours.
Bitcoin is trading at around USD 43,688 after experiencing a small rally. The market capitalization of the pioneering cryptocurrency fell from USD 897 billion to USD 821 billion, an 8.47% fall in 24 hours.
A Debt that Exceeds USD 300 Billion Precipitates the Crisis
Evergrande might not be able to meet million-dollar interest payments on a debt that exceeds USD 300 billion. The real estate sector in China and other Asian countries could collapse due to fear of that firm’s bankruptcy.
The Hang Seng stock index fell by 7% after the company’s share price fell by 10% in the Hong Kong markets. That drop, the biggest since 2016, extended to European and North American markets and even cryptocurrencies.
The local newspaper El País of Beijing reported that markets fear that the Chinese government will not intervene. Evergrande’s liquidity problems could cause a wave of bankruptcies that would affect the financial sector that made loans to them. That real estate company’s debt equates to 2% of China’s Gross Domestic Product (GDP) and the entire South African economy.
The Dow Jones Industrial Average recently closed 164 points down, or 1.8%, while the S&P 500 Index lost 2.2%, and the NASDAQ went down by 2.1%. According to data from Barrons, that has been the hugest drop for those last two indexes since May as the Dow Jones faces its most dramatic pullback since July.
Banks of China Already Knew of the Nearness of the Evergrande Crisis
An analysis that Reuters published recently indicated the possibility of a global economic crisis if Evergrande defaulted. China’s most important banks already knew that Evergrande could not meet payment commitments that were due soon.
Several people proposed using Bitcoin as a store of value to protect themselves against the possibility of such a scenario. However, the first cryptocurrency on the market could not decouple from the stock markets, falling alongside them. The so-called Black Thursday of 2020, the health crisis due to the COVID-19 pandemic, unleashed something similar.
The pioneering cryptocurrency has proved to be an excellent store of value in cases like that of Evergrande. Big renowned companies like MicroStrategy and Tesla have large amounts of Bitcoin in their treasuries. Several analysts have referred to Satoshi Nakamoto’s creation as digital gold better than the precious metal itself.
By Alexander Salazar
