Is Evergrande China’s ‘Lehman Brothers moment’ and could it actually be good for Bitcoin?
Link copied to
China’s second-largest property developer, Evergrande, is US$300 billion in debt and there are fears of a widespread knock-on effect on financial markets. But Bitcoin’s looking good, according to famed analyst PlanB.
There are rumbling concerns that the Chinese real estate company, which has investment ties from entities all over the world, is facing a “Lehman Brothers moment” that could cause a domino-effect worldwide market crash.
Lehman Brothers was a global financial services firm whose bankruptcy in 2008 was caused by the subprime mortgage crisis, leading to the US stock market crash and global financial crisis of that year. It was partly the subject of the 2015 film The Big Short.
Lehman Brothers had US$639 billion in assets and US$613 billion in liabilities, so Evergrande’s debt is a lot less but still significant.
There are concerns that ensuing negative sentiment from an Evergrande default would plummet all risk-on asset classes, including crypto.
But have a look at this recent tweet from Bitcoin “Stock to Flow” chart creator PlanB…
— PlanB (@100trillionUSD) September 15, 2021
While it’s difficult to imagine how another 2008-style stock market crash could possibly be “good” for risky, highly volatile assets, PlanB is referring to the broader, Bitcoin inflation-hedge “money printer goes brrrr” narrative.
That, and perhaps the possibility of government bailouts for Evergrande.
Perhaps “might be ultimately good for Bitcoin” would be the more accurate way to phrase it.
Money printing has been occurring on a large scale by central banks over the past few years, particularly since the global pandemic first hit hard in early 2020.
Many observers believe inflation-hedging has been the chief reason for Bitcoin and crypto’s rise since that time, in which the US alone has printed more than US$8 trillion, leading to its current national debt figure in excess of US$28.7 trillion.
Bitcoin, in the same timeframe, has run up from a low near US$3,000 to today’s price of about US$48,000, peaking in April close to US$65,000.
Corporations are holding 7 trillion in cash which is being eroded significantly year on year by inflation.
There is only 1.817 million #bitcoin on exchanges.
It would only take 1.5% of this corporate cash to buy all available BTC.
No one is bullish enough!
— Lark Davis (@TheCryptoLark) September 16, 2021
Meanwhile, the largest US dollar stablecoin issuer, Tether (USDT), has confirmed it does not hold, and has never held, any commercial paper or other debt or securities issued by Evergrande.
This has been the source of a few background fears within crypto circles this week, despite the market showing signs of strength since last weekend. That said, the sceptics are still out in force…
Tether refuses to deny holding Chinese Commercial Paper. They came out and said that they’re not holding Evergrande Commercial Paper.
But whose Chinese Commercial Paper are they holding and is there exposure in those instruments to Evergrande. Tether refuses to come clean. pic.twitter.com/ZAzhURXoPL
— Bitfinex’ed 🔥 Κασσάνδρα 🏺 (@Bitfinexed) September 15, 2021
According to Cointelegraph, Evergrande’s stock was at 2.63 Hong Kong dollars at the close of trading in Hong Kong on Thursday, down from 5.26 HKD at the beginning of July. At its peak in 2017, it was above 30 HKD.