Bitcoin's price falls on news of China's Evergrande sell-off

Written in September 2021. A Hong Kong court ordered Evergrande to be liquidated in January 2024. The article is kept as written.

The Evergrande crisis looks to have affected investment markets more than expected, equities and crypto alike — a case study worth following closely.

According to a CNN Business report from Hong Kong, the price of Bitcoin fell owing to investors' fear at news of a share sell-off to repay the enormous debts of Evergrande, China's second largest property company. The effect was not confined to Chinese investors but reached stock market investors worldwide.

Bitcoin's price fell sharply, more than 5.7% within 24 hours

On Tuesday the price of Bitcoin fell more than 5.7% over 24 hours, trading at 42,955 dollars a coin at that point, according to Coindesk's tracker. Other currencies fell just as heavily, with Ethereum and dogecoin down more than 4.4% and 6% respectively over 24 hours at that time.

It was not only the crypto market that was affected. The US stock market fell on Monday as well, as Wall Street worried about what was happening at Evergrande, leaving the S&P (SPX) and Nasdaq (COMP) with their worst performance since May.

The property company is facing debts of as much as 300 billion dollars, and was due to pay bond interest to banks on Monday, according to Bloomberg.

The interest on the two bonds Evergrande has to pay amounts to as much as 100 million dollars and was due before 24 September, according to Refinitiv. That news sent Evergrande's shares down 5.7% on Tuesday.

Evergrande's debt is so large that investors fear it turning bad

The reason investors worldwide, not only in mainland China, are worried about the situation is that Evergrande's debt is a large enough sum to affect the stability of the market — from the US Federal Reserve through to Goldman Sachs (GS) and JPMorgan (JPM).

To say nothing of the situation in Asia, where the Hong Kong market, banks, insurers and other property companies in China have all fallen badly.

Edward Moya, senior market analyst for the Americas at Oanda, said on Monday that Bitcoin is no different from any other asset class, noting that the failure at Evergrande had created enough risk to send everything lower. He added that the crypto market had performed very well despite considerable volatility, so it was no surprise that Wall Street would sell crypto first after a major business risk event in China, with investors ready to pull money out quickly.

Investors are still buying the dip, even with no sign of recovery

But a sharply falling crypto market did nothing to unsettle Nayib Bukele, president of El Salvador, who announced that he had just bought another 150 Bitcoin, bringing the country's total holding to 700 — fitting for the first country in the world to approve Bitcoin as legal tender.

El Salvador's president is not the only one who still believes crypto is in an upward phase. Investors continued to buy Bitcoin and open long positions on crypto in numbers across the derivatives exchanges.

Last but not least, the altcoin market came racing back

And on Thursday the crypto market recovered again, on two main drivers: the US Federal Reserve announcing that it would hold interest rates, and Evergrande announcing that it would plan to pay its bond interest together with the Chinese government. That sent the crypto market bouncing back energetically, particularly the crowd favourites AVAX, LUNA and ATOM, which kept surging, up 19%, 25% and 24% respectively over the past 24 hours according to CoinMarketCap.