Crypto Market Loses $250 Billion as Evergrande Fears Mount

A jittery day for both Wall Street and digital asset investors questioning whether Evergrande debt woes can be contained.

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  • Crypto market cap sinks amid the Chinese real estate giant’s debt crisis
  • Equities globally are headed for their worst day in two months

Cryptocurrencies dipped lower Monday in a broad sell-off many analysts attribute to growing concerns over China Evergrande Group’s debt crisis and contagion fears. 

Cryptocurrency’s market capitalization fell below $1.9 trillion Monday morning, according to data from CoinMarketCap. Following a relatively positive weekend for digital assets, bitcoin fell below $45,000 and Ethereum has lost about 9% over the past 24 hours. 

“This weekend we saw a couple of the alternative layer-ones hit new all-time highs, specifically Avalanche and Cosmos, I do think that there was a fair bit of profit-taking, at least that’s kind of what we’re seeing at our desk,” said Joshua Lim, head of derivative trading at Genesis. “A lot of folks are taking risks off the table specifically because of this Evergrande news, and it helps that these names have outperformed a lot, coming into this.”

Mark Yusko, founder, chief investment officer and managing director of Morgan Creek Capital Management, shared his insight on a recent On the Margin Podcast with Blockworks’ co-founder Mike Ippolito.

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Risk on, risk off

Stocks globally were trading lower on Monday with the Dow Jones Industrial Index and the S&P 500 both down about 1.5%, at time of publication. Other Chinese real estate developers, such as Henderson Land Development Co, slipped as well. It is a correlation similar to the situation in March 2020, experts said, when the COVID crisis was the driver of markets. 

“Traditional markets right now are selling off, and all the correlations you typically see when the market is fixated on one event or one risk, have come to light again,” said Roshun Patel, vice president at Genesis. “The Evergrande situation, whether it’s warranted or not, has the entire market fixated on this one thing and the fallout from it.”

Evergrande’s potential impact on the digital asset space is indicative of crypto’s status as an asset class, Lim said. 

“​​My personal view is, to the extent that crypto has become much more of a macro-integrated asset, a lot of people now treat it as just another risk bucket in their broader portfolio, the correlations on these sorts of macro events are going to be higher,” he said. 

Evergrande’s debt load stands somewhere north of $300 billion dollars, and they have bond payments to the tune of $83.5 million due September 23 on notes due in the first quarter of 2022. The company has 30 days from the scheduled payment date to pay, or the bond defaults.

The world is waiting to see how the Chinese government will respond and whether a bailout is on the table. The rescue of China Huarong Asset Management Co., announced August 18, was a tumultuous affair which Bloomberg News called a “culmination of months of bureaucratic infighting, ego-flexing and buck-passing.”

Evergrande shares were down 10% at the time of publication.


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