Bitcoin and other cryptocurrencies fell sharply on Monday as the market struggled against the shockwaves sent by Chinese real estate developer Evergrande’s potential collapse.
According to financial journalist Colin Wu, the ongoing bloodbath in crypto has been triggered by Evergrande real estate group’s plunging stock, which has declined by 10.24% in the past 24 hours.
Evergrande’s potential downfall has affected both the traditional and digital assets market. Hong Kong’s Hang Seng index, for instance, shaved off 7% of its value yesterday, reaching a 52-week low.
Meanwhile, the S&P 500 has also dropped 1.7%, following concerns that China will allow Evergrande -- the second-largest developer in the country -- to default.
As per The Wall Street Journal, Monday’s selloff was part of a broader shift from risky assets like cryptocurrencies, in favor of treasury bonds.
Additionally, there are concerns about Evergrande’s impact on Tether. The largest stablecoin, which is pegged to the value of the US dollar, has allocated half of its assets to commercial paper. Speculations are rife that some of these assets may be exposed to Chinese commercial paper.
For its part, the stablecoin issuer has already clarified that it does not own commercial paper in the Evergrande group.
Nonetheless, Tether is still vulnerable to the situation playing out in China, as indicated by Noelle Acheson, head of market insights at Genesis Trading:
Bitcoin started the week with a dramatic loss of 9.8% due to the turmoil in the Chinese real estate market. The flagship cryptocurrency witnessed $312 million worth of liquidations, a massive drop in market capitalization, and an increase in the cumulative losses of market participants.
Still, some investors are throwing their weight behind Bitcoin and buying the dip. El Salvador, the Central American country that uses Bitcoin as legal tender, has purchased another 150 coins, and now holds a total of 700 BTC.