The headliner in the last couple of weeks has definitely been China's largest company, Evergrande, which is facing a major financial crisis and could end up in bankruptcy. But with it, the company may take down so many other things. Global stock markets are tumbling, and even Bitcoin's value is in the red, losing 8% in the last 24 hours alone. How does Evergrande's situation affect Bitcoin? Stay with us to learn!
Chinese Real Estate Giant, Evergrande, Facing Major Debt Crisis
The whole financial world is attentively following the situation with Evergrande, China’s largest real estate company, which has lost another yet 10% in the last couple of days.
The reason for the drop is the major debt crisis the company is facing. Evergrande has borrowed over $300 billion from 121 financial firms and 171 Chinese banks, in order to develop over 1,300 projects across over 280 cities in the country throughout the years. When Beijing introduced new rules last year to control real estate developers and the amount of money they’re owing, it all started going downwards. Evergrande started struggling and became unable to pay the interest payments on its massive debt. So, its stock lost over 80% during the course of the last six months, and 10% today alone.
If Evergrande is to go bankrupt, it would have critical effects on the global economy. Not only will it affect China’s economy, but it will also affect international partners which will also lose money if the company fails to stay afloat.
What Does This Mean for Bitcoin?
Out of fear for Evergrande’s bankruptcy, global equity markets started falling, as well, Bitcoin’s price included. And even though Bitcoin should not be concerned with the global turmoil of fiat currency-related stocks, considering it is of unconventional nature and a risk asset, always behaving unpredictably on the market, still, its price went down by 8% in the last 24 hours alone!
It is popular knowledge that when global markers are shaken, Bitcoin's price tumbles as well, considering massive institutions are becoming a major part of the market. And even though Bitcoin should not be a correlated asset in this case, since it is fundamentally different from traditional assets, yet, until the China fears are settled, expectations are that its value may go down even further.
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