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Is the Evergrande crisis pushing Bitcoin, Tether markets on the verge of chaos

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The COVID-19 pandemic managed to bring the world economy on its knees. As countries are still recovering and picking up the pieces, another concern awaits them – the Evergrande Crisis.

Owing to its $300 billion worth liabilities, the Evergrande Group has been in the news for quite some time now. At this point, China’s second largest property developer has the potential to fracture the global financial landscape. Right from investors and suppliers to banks and other creditors, the fate of every stakeholder associated with Evergrande remains iffy.

Mounting Debts

Evergrande, a Fortune Global 500 group enterprise, is listed in Hong Kong. Being the face of the real-estate sector in China, Evergrande has more than 1.3k projects spread across the 280 cities across the mainland.

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Its debts essentially started rising when the company borrowed to finance other projects under its own umbrella. It further ended up selling apartments at a faster rate with low margins, hoping to raise cash and buy land again. Since 2020, Evergrande has remained China’s most indebted real estate company.

As far as this year alone is concerned, the company is liable to pay $670 million. As such, its total liability worth 1.97 trillion yuan [approximately $300 billion] accounts for 2% of China’s GDP.

Source: Washington Post/Bloomberg

As per data from Y Charts, the average debt-equity ratio of the company currently stands a little over 6. Ideal ratios usually revolve within the 1-1.5 bracket. However, companies in the real estate sector are exposed to more risk and hence their industrial average has more or less revolved around 3.5 over the past few years. By and large, this means Evergrande’s growth thus far has been debt-financed, which isn’t really a healthy sign.

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Evergrande Debt-Equity ratio || Source: Y Charts

Further, as far as the investors are concerned, the share value of Evergrande fell by more than 80% this year and is currently at an inevitable 4-year low. This downtrend became even more steep when the Chinese government asked Evergrande to pay 40% of its debts in one go last month. However, the debts largely remain unpaid.

Major credit rating agencies have asserted that the company would not be able to repay its debts. Fitch, for that matter, has already downgraded the company’s credit rating score. Their report noted,

“The recovery analysis assumes that Evergrande would be liquidated in a bankruptcy because it is an asset trading company.”

Source: CNBC

The crypto-intersection

Well, amidst the economic chaos and real-estate crisis, one may wonder how does crypto come into the picture. Well, the financial sector is multi-dimensional and intersections between various dimensions are almost inevitable.

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Crypto transactions, as such, are heavily reliant on stablecoins. It is a known fact that both traders and investors prefer using stablecoin trading pairs rather than fiat. Tether, the largest stablecoin, is a Hong-Kong based stable currency. To a fair extent, staying in the same playing field as Evergrande makes Tether susceptible to the domino effect.

Consider this – most of the reserve assets Tether holds to support its USDT are commercial papers (CPs) and certificate of deposits (CDs) instead of the US dollar. As per official data, it holds over $30.8 billion in CPs and CDs.

Source: Twitter

As soon as the Evergrande crisis started gaining traction, people from the crypto space started suspecting Tether’s holdings. However, these claims did not hold much water when the company asserted that it did not hold any Evergrande CP. A recent Reuter’s report highlighted,

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“Tether does not hold any commercial paper or other debt or securities issued by Evergrande and has never done so.”

Well, even though the aforementioned claims by Tether do provide some respite to the crypto market, it should be noted that Evergrande, under pressure, might end up dumping its crypto holdings across the market to account for bond leverage. If that happens, Bitcoin’s and the broader crypto market’s crash would be almost unavoidable. In fact, people from the community believe that the same would end up having dire consequences.

However, at the time of writing it was noted that Evergrande had just kicked off a process to repay its investors with discounted properties.

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So, is Evergrande too big to fail? Well, nothing can be said with surety at the moment. However, it should be noted that the community, believes so. As per most analysts, the state would step in and either help in bailing out the enterprise or would facilitate a restructuring where other developers could take over Evergrande’s incomplete projects in exchange for a share of pieces of land it owns.

Well, only time will tell how serious Beijing is about de-risking. Despite what analysts assert or believe, investors should remain alert. As such, the debt crisis has the potential to drag down the returns offered on bonds, CPs, CDs, and shares associated with the real-estate sector. If Evergrande’s debt-bomb ends up exploding, the chain-reaction on other sectors, including that of crypto, would anomalous, to say the least.

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Rich Dad Poor Dad Author Issues Dire Warning on Inflation, Says He’s Buying Bitcoin, Ethereum and Two Additional Assets

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Rich Dad Poor Dad author Robert Kiyosaki is concerned that working-class Americans will be wiped out by rising inflation unless they invest in several key assets.

In a YouTube video on The Rich Dad Channel, the widely known author says that true capitalism has been abandoned, and the government instead intervenes on behalf of banks.

“The reason they’re talking about inflation or deflation is because, way back when, in the 70s, a true capitalist would let a business fail. According to [Austrian political economist Joseph] Schumpeter, capitalism destroys inefficient companies.

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If you look at one example, not too long ago there was Blockbuster Video. Then Netflix came along and they’re toast. They’re just gone. A true capitalist wipes out the inefficient or the obsolete.

But for the last so many years, since 1907 really, they’ve been saving the banks. The banks are so corrupt, and the reason the Federal Reserve had to come in was to protect the rich bankers.

And what they did was, back in 2008 there was quantitative easing, which is a very complex subject, but basically the Fed just prints money and gives it to banks to prevent them from failing. That’s not capitalism, that’s Marxism. That’s socialism, that’s communism. It’s called central banks.”

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Kiyosaki warns that unlimited money printing as part of official government policy will eliminate the working class.

“The reason inflation is going to wipe out people is because the average person is a consumer. Everybody talks about, ‘T-bone steak [costs] this now, and gasoline’s this and toilet paper is that.’

That’s because… Everything’s to protect the bankers. And that’s why I feel for the working-class people. I think it’s criminal that our school system is part of Marxism. There’s no financial education in the schools and it’s not a mistake.

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To the people who are complaining about inflation, just know it’s because the Federal Reserve Bank, the U.S. Treasury… they’re as corrupt as they come.”

The author tells his 1.8 million followers on Twitter that the recent 25% price increase at discount retail chain Dollar General is a bellwether event signaling that investors should protect themselves by picking up some cryptos like Bitcoin (BTC) and Ethereum (ETH), as well as gold and silver.

“Dollar Tree becomes $1.25 Tree. Inflation is a tax on the poor and middle class. Inflation makes the rich richer.

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Get smart. Get richer. I am buying more gold, silver, Bitcoin, Ethereum, rental real estate, and oil. What are you buying?”

CNN Business reported this week that Dollar Tree cited rising inflation and the ongoing supply chain crisis as reasons why it planned to permanently abandon its longstanding $1 price point on all products.

At time of writing, Bitcoin is valued at $55,190, Ethereum is exchanging hands for $4,367, gold is going for $1,781, and silver is worth $22.44. Kiyosaki also issued a warning in September that a major stock market crash would occur in October of this year.

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Top 3 Price Prediction Bitcoin, Ethereum, XRP: Crypto markets may hit the brakes

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  • Bitcoin price congestion and indecision continue, but opportunities on both sides develop.
  • Ethereum price fails a bullish breakout above its bear flag, threatening continuation moves south.
  • XRP price is positioned at a make-or-break point, hovering above final support that could thrust Ripple below $0.80

Bitcoin price remains inside the Cloud within the Ichimoku Kinko Hyo system, indicating continued volatility and uncertainty. Ethereum price failed to close above the bear flag on Tuesday, but the bullish structure remains. XRP price barely holding support, could drop lower.

Bitcoin price develops opportunities on its Point and Figure charts

Bitcoin price remains stuck inside the Cloud on the daily Ichimoku chart, providing little opportunity or guidance when viewed from that chart style. However, Point and Figure charting reduces the ‘noise’ associated with Japanese candlestick charts and focuses only on price action, giving a clearer picture of Bitcoin’s behavior and what kind of trading opportunities exist.

A theoretical long trade setup exists with a buy stop order at $60,000, a stop loss at $58,000, and a profit target at $66,000. This hypothetical entry is exceptionally bullish for two reasons. First, the entry is a breakout above a triple-top, and second, the entry confirms a powerful bullish reversal pattern in Point and Figure known as a Bearish Fakeout.

BTC/USD $500/3-box Reversal Point and Figure Chart

The theoretical long idea is invalidated if the current O-column moves below $55,000.

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On the short side of the trade, a hypothetical short idea is a sell stop order at $53,000, a stop loss at $56,000 and a profit target at $44,000. The entry confirms one of the most sought-after short entry patterns in Point and Figure, a Bearish Catapult. In addition, a trailing stop of one to two boxes to protect any implied profits would help mitigate any whipsaws in price action that may occur.

BTC/USD $1,000/3-box Reversal Point and Figure Chart

The hypothetical short setup is invalidated if the long idea above is triggered.

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Mercado Pago: it will not be possible to transfer Bitcoin purchased on the platform

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Mercado Pago announced the launch of a service that will allow Brazilians to buy, reserve and sell cryptocurrencies.

As announced by the payments arm of Mercado Livre, this is an initiative in partnership with Paxos.

The collaboration will allow integration with the Mercado Pago account and the management of operations, with blockchain technology.

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Thus, without leaving the app, users will be able to track the price, as well as buy and sell Bitcoin, Ethereum and USDP; stablecoin from Paxos.

“This is an important milestone for Mercado Pago, which continues its trajectory by democratizing and massifying operations with cryptocurrencies. From the account, we want to accompany our users as they enter the crypto paradigm, which is gaining more and more relevance in the financial world. Based on the experience of quick and secure use of our platform, we will offer simplified access to these assets”, says Osvaldo Giménez, CEO of Mercado Pago.

Transactions with Bitcoin, Ethereum and USDP can be carried out with money available in the Mercado Pago account. The minimum purchase price is R$1.

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However, at this first moment, users who buy cryptocurrencies will not be able to transfer them to external wallets.

Cryptocurrencies in the Paid Market

According to Tulio Oliveira, vice president of Mercado Pago in Brazil, with this first step towards the crypto universe, the company wants to contribute to a great leap in education and financial inclusion of the Brazilian population.

“We will monitor our users closely. Let’s help them improve their cryptocurrency trading experience. In addition, we will offer all educational support for them to make the best decisions”, he said.

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Walter Hessert, head of Strategy at Paxos, said that this is a transformative moment for Latin America.

“Mercado Pago is offering a perfect experience in crypto and stablecoins, reaching millions of Brazilians. This will accelerate the conventional adoption of cryptocurrencies and stablecoins across the continent. We are excited to partner with Mercado Pago to make this possible”, he concluded.

Also Read: Adidas’ First Metaverse Partnership Includes NFTs

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Also read: Meta reviews policy and enables cryptocurrency ads on Facebook and Instagram

Also read: After quitting Twitter, Jack Dorsey changes Square’s name to Block

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