Sebastian Sinclair


<p>Bitcoin plunged more than 8% to around $25,500 on Thursday afternoon, its largest daily decline this year.</p>



<p>The crypto had been trading around $28,000 shortly before a Wall Street Journal report that SpaceX had sold all its holdings in 2022. That appears largely coincidental, however, as bitcoin had already begun its descent, reflecting several bearish <a href="https://blockworks.co/news/bitcoin-holders-underwater-nupl">on-chain </a>metrics, when the Journal article was published at 3:22 ET.</p>



<p>SpaceX, which held $373 million worth of BTC in 2021 and 2022, <a href="https://www.wsj.com/tech/behind-the-curtain-of-elon-musks-secretive-spacex-revenue-growth-and-rising-costs-2c828e2b">reportedly</a> sold the crypto after writing down the value of its holdings, <a href="https://blockworks.co/news/elon-musk-teslas-bitcoin-sale-not-a-verdict-on-the-asset">similar to actions take by Tesla last year</a>.&nbsp;</p>



<p>Neither SpaceX nor CEO Elon Musk have commented on the report, and the exact timing of the sale is unknown. SpaceX did not immediately return a request for comment.</p>



<p>Analysts are skeptical about the timing and response to the news. Terrence Yang, managing director at Swan Bitcoin, told Blockworks, &#8220;The fact that SpaceX sold all or almost all its bitcoin should have been priced in by the market.&#8221;&nbsp;</p>



<p>Other analysts pointed to overexposure and market exuberance over a potential US spot BTC ETF approval, which has reportedly been delayed until March of next year.</p>



<p>“Combined with nuance around how price action has been really apathetic and weak post-ETF announcements, the conclusion should have been short-term caution,” Jason Pagoulatos, head of markets at Delphi Digital told Blockworks.&nbsp;</p>



<p>He said a lot of market participants were likely mispositioned because of that hype and were likely caught unaware, resulting from <a href="https://members.delphidigital.io/feed/crypto-price-action-apathy?utm_source=link&amp;utm_medium=portal">price action apathy</a>. Thursday’s sell-off subsequently witnessed more than <a href="https://blockworks.co/news/price-dip-long-liquidation">$200 million</a> lost over a 24-hour period in long positions.</p>



<h2 class="wp-block-heading">Panic sell</h2>



<p>The bitcoin-led sell-off sent shockwaves through the market. Ether (ETH) fell 12% to $1,530, while dogecoin (DOGE), a Musk favorite, fell 15% to $0.056. Ether recovered from its five-month low, clawing back 9.7% <a href="https://www.bnnbloomberg.ca/sec-set-to-greenlight-ether-futures-etfs-in-win-for-crypto-industry-1.1960429">following</a> a Bloomberg rehashing of <a href="https://blockworks.co/news/sec-consider-ether-futures-etfs">previously reported news</a> that the SEC may greenlight a futures-based ether ETF. The industry’s second-largest digital asset remains suppressed — down about 6% over the past 24 hours as of 5:00 am ET.</p>



<p>Rich Rosenblum, CEO of market maker GSR, agreeing with previous takes on market exuberance, noted multiple factors were at play, including a strengthening US dollar and a reversal to this year&#8217;s tech rally.&nbsp;</p>



<p>“Strong tech sector buying, BTC ETF filings, and the Ripple win brought a wave of macro buying to crypto in June,” he said. &#8220;But that bullishness is fading as macro markets have been reversing course in recent weeks,&#8221; he said.</p>



<p>“The simultaneous timing of Evergrande and the SpaceX news spooked the market, flushing out some futures length. Assets that rose the most over the last month were the hardest hit.”</p>



<p>The tech-heavy Nasdaq Composite fell 1.1% to 13,316 by mid-afternoon on Thursday, while the Dow Jones Industrial Average also slipped 0.8% to 34,474</p>



<h2 class="wp-block-heading">The case for Evergrande</h2>



<p>The crypto turmoil coincides with a broader sell-off in risk assets. <a href="https://blockworks.co/tag/evergrande">Evergrande Group</a>, China&#8217;s one-time second-largest property developer, <a href="https://www.afr.com/chanticleer/china-s-fresh-evergrande-mess-isn-t-only-warning-sign-for-investors-20230818-p5dxix">filed for</a> Chapter 15 bankruptcy in New York on Thursday.&nbsp;</p>



<p>The firm&#8217;s extensive borrowing led to its <a href="https://blockworks.co/news/evergrande-default-adds-to-market-jitters">default</a> in 2021, triggering a severe property downturn in China&#8217;s economy. At the time, officials from the People&#8217;s Bank of China sought to downplay the risks to financial markets, arguing a contagion-wide effect had been contained.</p>



<p>According to Michael Rinko, research analyst at Delphi Digital, China is undergoing an extensive, state-driven deleveraging of the real estate sector.&nbsp;</p>



<p>The situation has shaken confidence and demand across the nation, with recent indications such as a recent <a href="https://www.cnbc.com/2023/08/15/china-central-bank-cuts-rates-for-second-time-to-support-economy.html">rate cut</a> by the People&#8217;s Bank of China hinting at developing economic cracks.</p>



<p>Investment manager Cathie Wood of Ark Invest also weighed in, asserting that China is exporting deflation more extensively than many economists realize.&nbsp;</p>



<p>An unfolding deflationary trend in China, exacerbated by recent defaults within the real estate and trust industries, may be nearing a 20% impact, she noted.</p>



<p>Wood also expressed concerns over the Federal Reserve&#8217;s aggressive rate hikes, which she contends have exacerbated global deflationary risks. The unprecedented 22-fold increase in the Federal Reserve&#8217;s funds rate may be impacting China first, with potential repercussions for the global economy to come later, the CEO added.</p>



<hr class="wp-block-separator has-alpha-channel-opacity"/>



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Bitcoin, crypto sell-off amid broader market jitters

Macauley Peterson

<div id="highlights-block_61d2df03a30a7" class="highlights">
        <ul>
                <li>An illegally obtained building permit was revoked and the company was ordered to demolish the 39 buildings within 10 days</li>
                <li>Evergrande missed bond payments equivalent to $255 million that came due on Dec. 28, but it has a 30 day grace period</li>
            </ul>
    
</div>



<p>In the latest setback for debt-ridden Chinese real estate giant Evergrande, an administrative ruling in ​​Danzhou City, Hainan Province, will force the company to demolish 39 buildings under construction on Haihua Island — the world&#8217;s largest artificial island — according to <a href="https://mbd.baidu.com/newspage/data/landingsuper?context=%7B%22nid%22%3A%22news_9821780312615022289%22%7D&amp;n_type=-1&amp;p_from=-1" target="_blank" rel="noreferrer noopener">local Chinese media</a>.</p>



<p>Evergrande&#8217;s woes have frequently been correlated with drops in stocks and digital asset markets, <a href="https://cms.blockworks.co/crypto-market-loses-250-billion-as-evergrande-fears-mount/" target="_blank" rel="noreferrer noopener">particularly in September</a>.</p>



<p>Last month, Fitch Ratings <a href="https://cms.blockworks.co/evergrande-default-adds-to-market-jitters/" target="_blank" rel="noreferrer noopener">downgraded the Chinese real estate developer</a> to ‘Restricted Default’ after the grace period on bond payments, previously due, expired. Evergrande missed a further $255 million in coupon payments last week, <a href="https://www.reuters.com/world/china/china-evergrande-shares-fall-after-report-missed-coupon-payment-2021-12-30/" target="_blank" rel="noreferrer noopener">Reuters reported</a>, starting the clock on a new 30-day window before triggering a further default.</p>



<p>Shares traded sharply lower on the news and closed out December in Hong Kong trading at $1.59, for a loss of roughly -89% on the year.</p>




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<p>On Monday, the company requested shares to be halted pending the release of inside information, while an index of Chinese developer shares fell 1.7%, <a href="https://www.bloomberg.com/news/articles/2022-01-03/shares-suspended-from-trading-in-hong-kong-evergrande-update" target="_blank" rel="noreferrer noopener">Bloomberg notes</a>, although the company did not link the halt specifically to the demolition news.</p>



<p>Chinese Media <a href="https://mbd.baidu.com/newspage/data/landingsuper?context=%7B%22nid%22%3A%22news_9821780312615022289%22%7D&amp;n_type=-1&amp;p_from=-1" target="_blank" rel="noreferrer noopener">reports</a> that the Danzhou Comprehensive Administrative Law Enforcement Bureau issued the decision on Dec. 30, which was confirmed on Jan. 1, and requires Danzhou Xinheng Tourism Development Co., Ltd., an Evergrande subsidiary, to demolish the 39 buildings located in the bay area of ​​Danzhou City.</p>



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<p>The buildings occupy about 435,000 square meters on Haihua Island No. 2, but their planning permit was illegally obtained, according to the new order.</p>



<p>The development was a pet project of chairman Xu Jiayin, who told employees in a New Year&#8217;s speech that he was proud of their efforts in recent months despite the unprecedented financial challenges.</p>



<p>Unlike <a href="https://cms.blockworks.co/?s=evergrande" target="_blank" rel="noreferrer noopener">previous bouts</a> of grim Evergrande news, markets in Europe, as well as S&amp;P futures, show no adverse reaction in Monday trading as of 7:45 AM ET.</p>




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<p>Major equities markets alongside the largest digital asset names started the day flat or modestly higher, but faded as US markets opened in New York, kicking off <a href="https://seekingalpha.com/article/4474981-what-is-january-effect" target="_blank" rel="noreferrer noopener">a seasonally strong month</a> for stocks.</p>



<p><em>This story was updated on Jan. 3, 2022, at 9:15 AM ET.</em></p>



<hr class="wp-block-separator">
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<hr class="wp-block-separator">

Markets on Alert as Evergrande Ordered to Demolish 39 Buildings on World’s Largest Artificial Island


<p>Today&#8217;s episode of &#8220;<a href="https://youtu.be/lQlSPJbVDGk" target="_blank" rel="noreferrer noopener">On the Margin</a>&#8221; Weekly Roundup with Mike Ippolito and Mark Yusko has a special guest — Mark Yusko himself! (Just kidding, he came back from a two-week hiatus.)</p>



<p>Mike and Mark quickly got into November&#8217;s 6.8% CPI print, which was the highest in 39 years. They also discussed the factors driving inflation, and whether or not the factors pointed toward transitory or permanent inflation. Mike and Mark also covered Evergrande&#8217;s default, and whether or not the resulting fallout is cause for concern. </p>



<p>They also tackled skyrocketing household debt, a slowing global credit impulse and whether or not the world is headed for &#8220;Japanification,&#8221; before finally sharing their final thoughts on where bitcoin is headed next. Tune in to find out more.</p>



<p>Watch the full episode below! 👇</p>



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<p>&#8220;On the Margin&#8221;<em> </em>is a two-part show.&nbsp;Once a week, Mike interviews industry experts, and then at the end of the week, he is joined by co-host Mark Yusko where they break down the top crypto and macro stories. Episodes go live every Wednesday and Saturday morning.</p>



<p>Subscribe to &#8220;On the Margin&#8221; today on <a href="https://podcasts.apple.com/us/podcast/lyn-alden-explains-connection-between-inflation-bitcoin/id1558223079?i=1000513411286" target="_blank" rel="noreferrer noopener">Apple</a> or <a href="https://spoti.fi/3bTa9uw" target="_blank" rel="noreferrer noopener">Spotify</a>, or watch episodes on <a href="https://youtube.com/playlist?list=PLvER9nHSRN3xVs_p-dl7L7K_ZgL6lSudu" target="_blank" rel="noreferrer noopener">YouTube</a>.</p>



<hr class="wp-block-separator"/>



<p><strong><strong><strong>Get the day’s top crypto news and insights delivered to your inbox every evening.&nbsp;<a target="_blank" href="https://cms.blockworks.co/newsletter/?source=end" rel="noreferrer noopener">Subscribe to Blockworks’ free newsletter</a>&nbsp;now.</strong></strong> </strong></p>



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Podcast: Inflation, Evergrande’s Default, Bitcoin’s Next Moves

<div id="highlights-block_61b3756bdbc06" class="highlights">
        <ul>
                <li>Evergrande’s bonds and stock have been trading near their all-time lows this week</li>
                <li>“Watch credit default swap spreads on sovereign debt” for signs of credit contagion, advises Greg Foss</li>
            </ul>
    
</div>



<p>After many close calls for the embattled Evergrande property developer, a failed interest payment earlier this week led Fitch Ratings to <a href="https://www.fitchratings.com/research/corporate-finance/fitch-downgrades-evergrande-subsidiaries-hengda-tianji-to-restricted-default-09-12-2021" target="_blank" rel="noreferrer noopener">downgrade Evergrande’s credit rating</a> to RD (restricted default) — on Thursday.</p>



<p>Markets have been anticipating the potential for defaults on distressed debt from Evergrande <a href="https://cms.blockworks.co/evergrande-is-suspending-trades-friday-heres-what-that-means/" target="_blank" rel="noreferrer noopener">for months</a>. The company <a href="https://cms.blockworks.co/update-evergrande-has-paid-part-of-148-13m-interest-due-yet-dmsa-begins-bankruptcy-proceedings/" target="_blank" rel="noreferrer noopener">narrowly averted</a> a default in November, with last-minute interest payments, but on Monday, two bonds issued by Scenery Journey Ltd., passed their 30-day grace period, <a href="https://www.fitchratings.com/research/corporate-finance/fitch-downgrades-evergrande-subsidiaries-hengda-tianji-to-restricted-default-09-12-2021" target="_blank" rel="noreferrer noopener">Fitch wrote</a>, triggering the downgrade.</p>



<p>Evergrande subsidiary ​​Tianji Holding Ltd. owed the specific interest payments. Their non-payment opens up the potential for cross defaults on the parent’s offshore notes as well, totaling $19.2 billion of dollar debt, as <a href="https://www.bloomberg.com/news/articles/2021-12-09/evergrande-defaults-for-first-time-as-china-debt-strains-spread" target="_blank" rel="noreferrer noopener">reported by Bloomberg</a>.</p>



<p>Fitch noted in their downgrade notice that the “restricted” classification comes as “there has been no initiation of bankruptcy filings, administration, receivership, liquidation, or other formal winding-up procedures as yet with business operations continuing.”</p>



<p>In <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/1203/2021120302119.pdf" target="_blank" rel="noreferrer noopener">an exchange filing</a> a week ago, Evergrande stated it plans “to actively engage with offshore creditors to formulate a viable restructuring plan of them Company’s offshore indebtedness for the benefit of all stakeholders.”</p>



<p>Evergrande’s bonds <a href="https://www.bloomberg.com/news/articles/2021-12-09/evergrande-to-be-handled-in-market-oriented-way-pboc-s-yi-says" target="_blank" rel="noreferrer noopener">have been trading</a> for 20 cents on the dollar, near their September lows, and its stock fell Monday to a new low.</p>




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<h3 class="wp-block-heading"><strong>Government reaction</strong></h3>



<p>People’s Bank of China (PBoC) Governor Yi Gang sought to downplay the risks to financial markets during recorded remarks on Thursday for a seminar held with the Hong Kong Monetary Authority, <a href="https://www.wsj.com/articles/market-can-weather-evergrande-crisis-chinas-top-central-banker-says-11639040788">according to the Wall Street Journal</a>:</p>



<blockquote class="wp-block-quote"><p><strong>“The risk caused by a few real-estate firms in the short run would not undermine the market for the medium and the long run,” Mr. Yi said.</strong></p></blockquote>



<p>The PBoC <a href="https://cms.blockworks.co/btc-market-starts-monday-neutral-after-major-weekend-washout/" target="_blank" rel="noreferrer noopener">cut the reserve requirements</a> for banks on Monday, injecting the equivalent of about $188 billion of stimulus, a sign of its efforts to contain the crisis.</p>



<blockquote class="wp-block-quote"><p><strong>“The [PBoC] eased to help smooth the ‘default.’  In reality, the default has been priced in and anticipated for six months. The real issue will be credit contagion. Watch credit default swap spreads on sovereign debt as a warning signal,” Greg Foss, executive director of strategic initiatives at Validus Power Corp, told Blockworks.</strong></p></blockquote>



<p>That contagion could hit offshore creditors hard, as any restructuring plan <a href="https://www.bloomberg.com/news/articles/2021-12-05/china-braces-for-evergrande-restructuring-after-months-of-tumult" target="_blank" rel="noreferrer noopener">would likely prioritize</a> the millions of Chinese homeowners who put up down payments on Evergrande developments, as well the company’s employees and local suppliers, and any other investors who have more senior claims.</p>



<p>One question is where the Chinese leadership’s priorities will lie if credit conditions worsen. In Thursday’s comments, Yi Gang <a href="https://www.nytimes.com/article/evergrande-debt-crisis.html" target="_blank" rel="noreferrer noopener">blamed</a> Evergrande’s problems on its “own poor management and reckless expansion.”<br>Political concerns are trumping economic ones, <a href="https://www.csis.org/analysis/evergrande-dilemma-and-beijings-credibility" target="_blank" rel="noreferrer noopener">according to analysis</a> from the Center for Strategic &amp; International Studies.</p>



<p>“Beijing’s reaction to financial stress has clearly changed…One of the reasons that the Evergrande crisis is spreading to global markets is that investors can no longer be certain that Beijing is trying to maintain the same economic growth rates as in the past,” ​​Logan Wright, director of China markets research at Rhodium Group, wrote in October.</p>



<p>Bitcoin was down 7% yesterday, and has failed to get back above the $50,000 mark in Friday trading. In the past, Evergrande&#8217;s problems <a href="https://cms.blockworks.co/crypto-market-loses-250-billion-as-evergrande-fears-mount/" target="_blank" rel="noreferrer noopener">have been correlated</a> with weakness across the asset spectrum, although major international equities markets have remained relative unfazed this time around compared with major digital asset names.</p>




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<p><strong>Get the day’s top crypto news and insights delivered to your inbox every evening.&nbsp;<a href="https://cms.blockworks.co/newsletter/?source=end" target="_blank" rel="noreferrer noopener">Subscribe to Blockworks’ free newsletter</a>&nbsp;now.</strong></p>
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Evergrande Default Adds to Market Jitters

Sam Martin

<div id="highlights-block_617725d07bf3f" class="highlights">
        <ul>
                <li>CPI comes in at 6.2%, marking the largest print in the last 30 years</li>
                <li>BTC hits an ATH of $69,000 before a cascade of liquidations spurred a sell-off</li>
            </ul>
    
</div>



<p>The CPI came in hot at 6.2% versus the expected 5.9%. </p>



<p><meta charset="utf-8">Bond yields rallied as investors got nervous about maintaining their purchasing power. </p>



<p>BTC raced higher after the CPI numbers were released. </p>



<p>A cascade of liquidations sent BTC lower after the morning rally, seeing prices fall below $64,000. </p>



<p>Chinese real estate giant, Evergrande has paid part of $148.13 million interest due today according to a Bloomberg report. However, Deutsche Marktscreening Agentur (DMSA) has begun bankruptcy proceedings. The news led to risk-off sentiment into the close for equities, some commodities, and digital assets.  </p>



<p>YGG partners with Genopets, a blockchain-based game that combines play-to-earn with move-to-earn mechanics to reward users who exercise. </p>



<h3 class="wp-block-heading"><strong>Latest in Macro:</strong></h3>



<ul><li>S&amp;P 500: 4,646, -.82%</li><li>NASDAQ: 15,622, -1.66%</li><li>Gold: $1,850, +.92%</li><li>WTI Crude Oil: $81.30, -3.39%</li><li>10-Year Treasury: 1.57%, +.121%</li></ul>



<h3 class="wp-block-heading"><strong>Latest in Crypto:</strong></h3>



<ul><li>BTC: $64,755, -3.85%</li><li>ETH: $4,602, -3.50%</li><li>ETH/BTC: .0709, +.39%</li><li>BTC.D: 43.99%, +.26%</li></ul>



<h3 class="wp-block-heading">Consumer Price Index (CPI)</h3>



<p>Today the <meta charset="utf-8">Consumer Price Index (CPI) came in at 6.2% year-over-year versus analysts&#8217; consensus of 5.9% ahead of the report. This marks the largest CPI reading in more than 30 years, <a href="https://www.cnbc.com/2021/11/10/consumer-price-index-october.html" target="_blank" rel="noreferrer noopener">according</a> to CNBC.</p>



<p>&#8220;We’re likely going to remain in an inflationary environment for at least another quarter or two due to rent increases, and we’ll need to assess as more data comes in as to what extent it will remain in place beyond that point or take a break. Inflation has thus far rolled from category to category, with specific price spikes and shortages in certain areas at different times, rather than altogether. There’s still a clear ongoing labor shortage.&#8221; <a href="https://www.lynalden.com/premium-2021-10-31/" target="_blank" rel="noreferrer noopener">wrote</a> investment strategist Lyn Alden. </p>



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="407" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/inflation-1024x407.jpg" alt="" class="wp-image-10952" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/inflation-1024x407.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/inflation-1024x407.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/inflation-1024x407.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/inflation-1024x407.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/inflation-1024x407.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/inflation-1024x407.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/inflation-1024x407.jpg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/inflation-1024x407.jpg?w=1095 1095w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>



<p>The Employment Cost Index (ECI), a quarterly economic series published by the Bureau of Labor Statistics that details the&nbsp;growth of total employee compensation, is often a leading indicator for CPI. When looking at the two metrics on the same chart, it appears that inflation may remain hot for the next quarter or two. </p>



<div class="wp-block-image"><figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="710" height="448" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/@MikaelSarwe.png" alt="" class="wp-image-10953" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/@MikaelSarwe.png?w=710 710w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/@MikaelSarwe.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/@MikaelSarwe.png?w=407 407w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/@MikaelSarwe.png?w=414 414w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/@MikaelSarwe.png?w=347 347w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/@MikaelSarwe.png?w=80 80w" sizes="(max-width: 710px) 100vw, 710px" /><figcaption>Source: @MikaelSarwe</figcaption></figure></div>



<h3 class="wp-block-heading">Bonds sell-off</h3>



<p>Bonds sold off and consequently led to a rally in yields due to the hot inflation numbers. Some industry experts <a href="https://twitter.com/CaitlinLong_/status/1458507405675880452?s=20" target="_blank" rel="noreferrer noopener">believe</a> the Fed&#8217;s recently announced taper set to begin in December is contributing to the rally in rates. Jerome Powell <a href="https://www.investopedia.com/fed-will-start-tapering-in-december-2021-5208392" target="_blank" rel="noreferrer noopener">stated</a> that these monthly asset purchases initially will be reduced by $10 billion for Treasury securities and $5 billion for agency securities. That still leaves a total of $105 billion of asset purchases per month on behalf of the Fed. </p>



<div class="wp-block-image"><figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="670" height="450" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/chart-2-1.jpeg" alt="" class="wp-image-10957" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/chart-2-1.jpeg?w=670 670w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/chart-2-1.jpeg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/chart-2-1.jpeg?w=383 383w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/chart-2-1.jpeg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/chart-2-1.jpeg?w=326 326w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/chart-2-1.jpeg?w=80 80w" sizes="(max-width: 670px) 100vw, 670px" /></figure></div>



<p>Founder of FFTT, Luke Gromen, has been <a href="https://twitter.com/LukeGromen/status/1458523654703226885?s=20" target="_blank" rel="noreferrer noopener">warning</a> for some time that the Fed is &#8220;trying to ride 2 horses with one ass.&#8221; While US expenditures are far outpacing tax receipts and debt levels remain elevated, the Fed appears to be trying to inflate the debt away without spooking bond investors. </p>



<p>When inflation is running higher than the prevailing rates on bonds, the holders of said bonds are losing purchasing power because their return is not outpacing the rising cost of goods and services. </p>



<p>&#8220;This is the widest gap on record between the Fed&#8217;s short-term interest rate setting, and year-over-year CPI, including the 1970s. (We would have to go back to the 1940s to find a similar situation.),&#8221; <a href="https://twitter.com/LynAldenContact/status/1458462580025008129?s=20" target="_blank" rel="noreferrer noopener">according</a> to Lyn Alden. </p>



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="748" height="450" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD1_erNXEAMUpk5.png" alt="" class="wp-image-10958" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD1_erNXEAMUpk5.png?w=748 748w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD1_erNXEAMUpk5.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD1_erNXEAMUpk5.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD1_erNXEAMUpk5.png?w=434 434w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD1_erNXEAMUpk5.png?w=364 364w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD1_erNXEAMUpk5.png?w=80 80w" sizes="(max-width: 748px) 100vw, 748px" /></figure>



<h3 class="wp-block-heading">Bitcoin</h3>



<p>&#8220;The higher-than-expected US October CPI print is bullish for bitcoin,&#8221; Noelle Acheson, head of market insights at Genesis, told Blockworks. &#8220;Rising inflation with persistently low rates is a good tailwind for non-yielding inflation hedges. The macro situation is especially interesting for BTC in that a market in which you have bonds and equities rallying is one in which traditional investment theories no longer work.&#8221;</p>



<p>BTC rallied to a new ATH of $69,000 right after the CPI print, which liquidated a large number of shorts. The opposite occurred later in the day as equities closed weak, forcing a cascade of liquidations amongst longs. It appears as though the leveraged traders never learn their lesson. </p>



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="374" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/bybt_chart-3-1-1024x374.png" alt="" class="wp-image-10961" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/bybt_chart-3-1-1024x374.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/bybt_chart-3-1-1024x374.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/bybt_chart-3-1-1024x374.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/bybt_chart-3-1-1024x374.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/bybt_chart-3-1-1024x374.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/bybt_chart-3-1-1024x374.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/bybt_chart-3-1-1024x374.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/bybt_chart-3-1-1024x374.png?w=1370 1370w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure></div>



<p>Perpetual funding rates ahead of the price correction were creeping above .05% on numerous exchanges, <a href="https://app.laevitas.ch/dashboard/btc/futures/basis" target="_blank" rel="noreferrer noopener">according</a> to data from laevitas.ch. The following chart shows that historically when funding rates reach north of .05%, corrections often follow. Although during bull markets it is not uncommon for funding rates to remain extremely elevated for extended periods of time. </p>



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="512" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD2u-RzVUAQJDSV-1024x512.jpg" alt="" class="wp-image-10962" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD2u-RzVUAQJDSV-1024x512.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD2u-RzVUAQJDSV-1024x512.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD2u-RzVUAQJDSV-1024x512.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD2u-RzVUAQJDSV-1024x512.jpg?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD2u-RzVUAQJDSV-1024x512.jpg?w=2048 2048w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD2u-RzVUAQJDSV-1024x512.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD2u-RzVUAQJDSV-1024x512.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD2u-RzVUAQJDSV-1024x512.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD2u-RzVUAQJDSV-1024x512.jpg?w=80 80w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Source Jarvis Labs</figcaption></figure></div>



<p>The BTC move also coincided with early <a href="https://cms.blockworks.co/evergrande-defaults-on-148-13m-bankruptcy-proceedings-begin/" target="_blank" rel="noreferrer noopener">reports</a> that the Chinese real estate giant, Evergrande, had missed its interest payment due on November 10. Later, <meta charset="utf-8">a source close to the matter at Clearstream reported that the company had made three payments on its $148.13 million debt. The news seemed to stir risk-off sentiment in the markets, leading to a fall in equities and digital assets across the board. </p>



<h3 class="wp-block-heading">Non-Fungible Tokens (NFTs)</h3>



<p><a href="https://www.genopets.me" target="_blank" rel="noreferrer noopener">Genopets</a>, a Solana-based game, is partnering with Yield Guild Games to bring its assets to the YGG community. The Genopets game innovates by combining play-to-earn and newly coined &#8216;move-to-earn&#8217; to allow users to earn via both playing a game and exercising, <a href="https://medium.com/yield-guild-games/yield-guild-games-purchases-habitats-in-move-to-earn-solana-game-genopets-902653cd410e" target="_blank" rel="noreferrer noopener">according</a> to a company-released medium article.  </p>



<p>Trading data from <a href="https://opensea.io/rankings" target="_blank" rel="noreferrer noopener">OpenSea</a> and <a href="https://solanalysis.com" target="_blank" rel="noreferrer noopener">Solanalysis</a> of some of the top Solana and Ethereum projects can be found in the photos below:</p>



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="341" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.27-PM-1024x341.png" alt="" class="wp-image-10964" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.27-PM-1024x341.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.27-PM-1024x341.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.27-PM-1024x341.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.27-PM-1024x341.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.27-PM-1024x341.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.27-PM-1024x341.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.27-PM-1024x341.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.27-PM-1024x341.png?w=1225 1225w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Top Ethereum Projects</figcaption></figure></div>



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="287" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.38-PM-1024x287.png" alt="" class="wp-image-10965" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.38-PM-1024x287.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.38-PM-1024x287.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.38-PM-1024x287.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.38-PM-1024x287.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.38-PM-1024x287.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.38-PM-1024x287.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.38-PM-1024x287.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.38-PM-1024x287.png?w=1198 1198w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Top Solana Projects </figcaption></figure></div>



<p>If you made it this far, thanks for reading! I am looking forward to catching up tomorrow.</p>



<hr class="wp-block-separator"/>



<p><strong>Get the day’s top crypto news and insights delivered to your inbox every evening.&nbsp;<a href="https://cms.blockworks.co/newsletter/" target="_blank" rel="noreferrer noopener">Subscribe to Blockworks’ free newsletter</a>&nbsp;now.</strong></p>



<hr class="wp-block-separator"/>


Bonds Sell-off on 6.2% CPI Print; Bitcoin Liquidations Spur Correction: Markets Wrap

Jacquelyn Melinek

<div id="highlights-block_618c0f4938cbb" class="highlights">
        <ul>
                <li>Evergrande had previously defaulted on bond payments of about $47.5 million due at the end of September</li>
                <li>DMSA has not received any interest payments from Evergrande as of Wednesday, it said</li>
            </ul>
    
</div>



<p>The China Evergrande Group has paid part of its $148.13 million in interest payments, according to reports. </p>



<p>It was previously stated that the company has not paid interest on its debts and defaulted after failing to meet the deadline, according to a <a href="http://dmsa-agentur.de/download/20211110_DMSA_EVG_PM_en.pdf" target="_blank" rel="noreferrer noopener">letter</a> by Deutsche Marktscreening Agentur (DMSA). </p>



<p>Although DMSA claims that Evergrande didn’t pay its interest payments, a Clearstream spokesperson told <a href="https://www.bloomberg.com/news/articles/2021-11-10/evergrande-said-to-pay-delayed-interest-on-at-least-two-bonds" target="_blank" rel="noreferrer noopener">Bloomberg</a> it received overdue interest payments on three US dollar bonds issued by the Chinese developer. </p>



<p>Clearstream is an international central securities depository that provides post-trade infrastructure and securities services for customers across 110 countries, it said.</p>



<p>DMSA stated that the company has defaulted again on interest payments to international investors and is now preparing bankruptcy proceedings against the company. DMSA is an independent data service that evaluates market-relevant information on companies to help investors, according to its website.&nbsp;</p>



<p>DMSA has not received any interest payments from Evergrande, it said. Overall, Evergrande would have to pay $148.13 million in interest on its three bonds that were due today, DMSA said. “But so far we have not received any interest on our bonds,” DMSA Senior Analyst Marco Metzler said in the letter. “With banks in Hong Kong closing today, it’s certain that these bonds have defaulted,” Metzler added. </p>



<p>Bloomberg also reported Wednesday that two investors holding two of the bonds confirmed that they received the payments, but didn’t disclose their identity because they weren’t authorized to speak publicly.</p>



<p>As DMSA prepares to file for bankruptcy proceedings against the Chinese company, it’s calling on other bond investors to join in as well.&nbsp;</p>



<p>&#8220;But while the international financial market has so far met the financial turmoil surrounding the teetering giant Evergrande with a remarkable basic confidence &#8211; one can also say: with remarkable naivety &#8211; the US central bank Fed confirmed our view yesterday,&#8221; Metzler said. &#8220;In its latest stability report, it explicitly pointed out the dangers that a collapse of Evergrande could have for the global financial system,&#8221; he added.&nbsp;</p>



<p>Evergrande is the second-largest real estate developer in the country and has made headlines for its faulty practices including defaulting on bond payments of about <a href="https://cms.blockworks.co/evergrande-scrambles-to-reduce-debt/" target="_blank" rel="noreferrer noopener">$47.5 million</a> due at the end of September. In October, the company’s shares were halted in Hong Kong trading at one point, due to a <a href="https://cms.blockworks.co/evergrande-sells-more-assets-shares-halted-in-hong-kong/" target="_blank" rel="noreferrer noopener">sale of a majority stake</a> in its business for more than $5 billion.</p>



<figure class="wp-block-image"><img decoding="async" src="https://lh5.googleusercontent.com/BrRFTzhG6bymjPVNJRj2zzXimIsmMw1esUocKPwBmXoHfws6ew1E6yYnzyp_nCmkuOm9bM5tuyGHtNPU2t3N8vOqj-pFVlf5JLYA3WMZotjhiky2Qm0DlEzaeLyn_tiV_g_aiCMP" alt=""/></figure>



<p>Separately, Chinese authorities had asked local governments to prepare for the debt-inundated real estate company’s potential downfall, Blockworks previously <a href="https://cms.blockworks.co/report-chinese-authorities-may-be-preparing-for-evergrandes-collapse/" target="_blank" rel="noreferrer noopener">reported</a> in late September.</p>



<p>In October, the company <a href="https://cms.blockworks.co/evergrande-sells-more-assets-shares-halted-in-hong-kong/" target="_blank" rel="noreferrer noopener">sold</a> a $5.1 billion interest in its Evergrande Property Services Group to the 13th largest property developer in China in an effort to manage its debt.</p>



<p><em>This story was updated on November 10, 2021, at 5:43 pm ET and may be updated further if more information becomes available.</em></p>



<hr class="wp-block-separator"/>



<p><strong>Get the day’s top crypto news and insights delivered to your inbox every evening.&nbsp;<a href="https://cms.blockworks.co/newsletter/?source=end" target="_blank" rel="noreferrer noopener">Subscribe to Blockworks’ free newsletter</a>&nbsp;now.</strong></p>



<hr class="wp-block-separator"/>


Update: Evergrande Has Paid Part of $148.13M Interest Due, Yet DMSA Begins Bankruptcy Proceedings

<div id="highlights-block_615ae38888746" class="highlights">
        <ul>
                <li>Evergrande is making a &#8220;major transaction&#8221; in a move to manage its debt burden</li>
                <li>With liabilities of $300 billion, and a raft of illiquid assets, markets fear collateral damage</li>
            </ul>
    
</div>



<p>Shares of China Evergrande Group were halted in Hong Kong trading on Monday, according to <a href="https://doc.irasia.com/listco/hk/evergrande/announcement/a211004.pdf" target="_blank" rel="noreferrer noopener">an announcement</a> from the company, pending details of a &#8220;major transaction&#8221;. The reference is to a sale of a majority stake in its property management business, Evergrande Property Services Group, for more than $5 billion, <a href="https://www.reuters.com/business/china-evergrande-share-trading-halted-hong-kong-2021-10-04/" target="_blank" rel="noreferrer noopener">according to Reuters</a>.</p>



<p>The news ups the pace of Evergrande&#8217;s asset sales following <a href="https://cms.blockworks.co/evergrande-scrambles-to-reduce-debt/" target="_blank" rel="noreferrer noopener">last week&#8217;s divestment</a> of a 20% stake in Shengjing Bank, raising $1.5 billion. Chinese media <a href="https://www.globaltimes.cn/page/202110/1235627.shtml" target="_blank" rel="noreferrer noopener">reported Monday</a> that Hopson Development, another Chinese property developer, was the buyer of a 51% stake in the Evergrande property management business. Trading of Hopson and Evergrand Property Services Group shares were also both suspended in Hong Kong.</p>



<p>China&#8217;s central government is <a href="https://cms.blockworks.co/report-chinese-authorities-may-be-preparing-for-evergrandes-collapse/" target="_blank" rel="noreferrer noopener">involved in the unwinding</a> of the real estate giant, as Evergrande faces potential default on several bond interest payments later this month.</p>



<p>The former chairman of Hopson is Chu Mang Yee, a billionaire former government official who, <a href="https://www.bloomberg.com/news/articles/2021-10-04/hopson-s-chu-set-to-become-latest-tycoon-to-bolster-evergrande" target="_blank" rel="noreferrer noopener">Bloomberg reports</a>, is known in Chinese media circles as an “invisible magnate” due to his relatively low-profile. His daughter Chu Kut Yung is the current Hopson chair, and the family has a net worth north of $6 billion.</p>



<p>Bloomberg, citing &#8220;people familiar with the matter&#8221;, notes that dollar-denominated bonds due today, totaling $260 million and issued by a joint venture of Evergrande&#8217;s Hengda Real Estate subsidiary, are guaranteed by Evergrande. If left unpaid, Evergrande would be in default. Unlike the interest payments the company missed last week, there is no 30-day grace period.</p>



<p>The National Day Golden Week string of holidays are currently being observed in China from October 1 to October 7.</p>



<p>European markets are down roughly -0.1%, and US markets are set to open lower in New York, with S&amp;P 500 and Nasdaq futures trading between -0.35% and -0.5% just over an hour before the open.</p>



<p>Bitcoin has been ranging since a strong move up on Friday, between about $47,100 and $48,800, down about 1.3% in the past 24 hours.</p>


Evergrande Sells More Assets, Shares Halted in Hong Kong

<div id="highlights-block_61544bb28fc94" class="highlights">
        <ul>
                <li>The heavily-indebted firm faced a $47.5 million bond interest payment deadline today</li>
                <li>Shengjing Bank is itself one of Evergrande&#8217;s large creditors, and will receive the proceeds of the Evergrande&#8217;s share sale</li>
            </ul>
    
</div>



<p>The fate of struggling Chinese real estate giant Evergrande remains hazy as the company announced plans to sell most of its roughly 20% stake in a local bank in Shenyang, in the northeast of the country, to a state-owned bank, a sale which will raise 10 billion yuan (about $1.5 billion).</p>



<p>Concerns remain over the downstream effects of the firm&#8217;s massive debt burden, as the initial deadline on its latest $47.2 million bond interest payment has passed. The amount was due today on a 9.5% March 2024 dollar bond, but a 30-day grace period must elapse before Evergrande would be in default, <a href="https://www.bloomberg.com/news/articles/2021-09-29/fitch-cuts-rating-again-coupon-payment-looms-evergrande-update" target="_blank" rel="noreferrer noopener">according to Bloomberg</a>, which reports that credit rating agency Fitch has further cut Evergrande’s credit rating to a notch above default level.</p>



<p>The funds raised from sales of shares in Shengjing Bank will go to repay Evergrande&#8217;s debts to the bank itself, which is one of Evergrande&#8217;s largest creditors, <a href="https://www.reuters.com/world/china/investors-brace-rough-ride-evergrande-faces-payment-deadline-2021-09-28/" target="_blank" rel="noreferrer noopener">Reuters reported</a>, implying that none of those funds are available to service the debts of offshore bondholders — including the interest payment that was due today. <a href="https://edition.cnn.com/2021/09/29/investing/evergrande-stock-debt-crisis-intl-hnk/index.html" target="_blank" rel="noreferrer noopener">CNN reports</a> that $20 billion of Evergrande&#8217;s over $300 billion debt is in the form of international bonds.</p>



<p>According to <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0929/2021092900039.pdf" target="_blank" rel="noreferrer noopener">an Evergrande filing</a> reporting the transaction:</p>



<blockquote class="wp-block-quote"><p><strong>&#8220;The Company&#8217;s liquidity issue has adversely affected Shengjing Bank in a material way. The introduction of the Purchaser, being a state-owned enterprise, will help stabilise the operations of Shengjing Bank and at the same time, help increase and maintain the value of the 14.75% interest in Shengjing Bank retained by the Company.&#8221;</strong></p></blockquote>



<p>State-owned firms like Shenyang Shengjing Finance Investment Group, which purchased Evergrande&#8217;s Shengjing Bank stake have, been under pressure from the Chinese government to buy assets from Evergrande, as <a href="https://cms.blockworks.co/report-chinese-authorities-may-be-preparing-for-evergrandes-collapse/" target="_blank" rel="noreferrer noopener">part of a broader effort</a> to contain the fallout from the company&#8217;s insolvency.</p>



<blockquote class="wp-block-quote"><p><strong>&#8216;We are in the wait and see phase at the moment. The creditors are organising themselves and people are trying to figure out how this falling knife might be caught,&#8217; an unnamed advisor to an offshore Evergrande bondholder told Reuters.</strong></p></blockquote>



<p>Rob Brewis, Fund Manager at&nbsp;<a href="https://www.aubreycm.co.uk/" target="_blank" rel="noreferrer noopener"><strong>Aubrey Capital Management</strong></a> thinks there will be plenty of pain across the financial sector:</p>



<blockquote class="wp-block-quote"><p><strong>“The repercussions from the demise of Evergrande rumble on and we have very little to add as to where it is going and who else will get dragged down. It certainly won’t be the only Chinese developer to fail.&#8221;</strong></p></blockquote>



<p>Evergrande&#8217;s <a href="https://www.bloomberg.com/quote/3333:HK" target="_blank" rel="noreferrer noopener">stock was up</a> as much as 15% in Hong Kong on the news. The US dollar index ($DXY) has been trending up since a September 3 nadir, rising almost 2.2% through September, and reflecting investor flight to safety.</p>



<p><em>This article was updated on September 29, 2021, at 10:00 am ET</em></p>


Evergrande Misses Bond Payment Due Date; Scrambles to Reduce Debt

Morgan Chittum

<div id="highlights-block_614ce267ecb77" class="highlights">
        <ul>
                <li>In an effort to curb a potential financial crisis, the People’s Bank of China injected more than $18 billion into its banking system</li>
                <li>The real estate giant has amassed roughly $300 billion worth of debt, the equivalent to 2% of China’s GDP</li>
            </ul>
    
</div>



<p>As Evergrande China Group faces a series of massive bond payment due dates, Chinese authorities reportedly asked local governments to start preparing for the debt-saddled real estate developer’s potential downfall, the <a href="https://www.wsj.com/articles/china-makes-preparations-for-evergrandes-demise-11632391852" target="_blank" rel="noreferrer noopener">Wall Street Journal</a> reported Thursday.</p>



<p>Sources in the journal who are familiar with the matter said Chinese authorities told certain state-owned enterprises and government agencies to step in if Evergrande doesn’t manage its affairs in an orderly manner. Local-level agencies were reportedly instructed to help mitigate Evergrande’s impact on China&#8217;s economy.</p>



<p>Sources described the government’s guidance as a way of “getting ready for the possible storm.”</p>



<p>In an effort to limit potential impacts on the broader economy, the People’s Bank of China injected more than $18 billion or 120 billion yuan into its banking system on Wednesday.&nbsp;</p>



<p>The company reached an agreement with bondholders on a bond payment due Thursday north of $84 million, according to a stock exchange filing on Wednesday.</p>



<p>Greg Foss, executive director of strategic initiatives at Validus Power Corp, said it was “very uncertain” whether or not they would bail out offshore bondholders. </p>



<p>“Do they invoke something where offshore bondholders are penalized and they protect local claims, local claims being housing?” Foss told Blockworks. “Out of $300 billion of debt, $200 billion of this is from prepaid housing, [as in] citizens of China that have pre-paid for their house. Does the Chinese government protect those liabilities, versus the bank debt and publicly-traded bond liabilities? I really don’t know.”</p>



<h3 class="wp-block-heading">‘World’s most indebted real estate developer’</h3>



<p>In recent weeks, Evergrande has dominated mainstream headlines. However, the real estate giant has been in financial trouble for much longer, amassing roughly $300 billion worth of debt.&nbsp;&nbsp;</p>



<p>This followed years of unrestrained expansion during which Evergrande’s debt grew alongside its assets and size, not to mention a global pandemic that hit property sales. Its share price has steeply declined this year, and trading of its bonds has repeatedly been disrupted by stock exchanges. (Evergrande shares were down 13.2%, as of press time.)</p>



<p>Once <a href="https://cms.blockworks.co/evergrande-is-suspending-trades-friday-heres-what-that-means/" target="_blank" rel="noreferrer noopener">news</a> broke that Hengda Real Estate Group Co Ltd, the parent company of Evergrande, would suspend trading of onshore corporate bonds, markets reacted accordingly. A series of volatile trading days followed as Wall Street and digital asset investors assessed how the company’s travails could impact the global economy.</p>



<p>Cryptocurrency prices <a href="https://cms.blockworks.co/crypto-market-loses-250-billion-as-evergrande-fears-mount/" target="_blank" rel="noreferrer noopener">declined </a>on Monday as its total market cap plunged 9% on-day, in part due to lingering speculation that <a href="https://www.reuters.com/business/finance/stablecoin-tether-says-holds-no-evergrande-commercial-paper-2021-09-16/" target="_blank" rel="noreferrer noopener">Tether</a> was holding securities issued by the embattled developer.&nbsp;</p>



<p>“The scare over Evergrande defaulting on their bonds roiled the markets earlier this week as well as crypto markets, especially with the speculation that Tether may be holding Evergrande’s commercial paper,” said Kevin Kang, founding principal of BKCoin Capital. “However, Tether announced that they did not have any exposure to Evergrande, but that wasn’t enough to stop the risk-off sentiment across the markets.”</p>



<h3 class="wp-block-heading"><strong>Cryptos regain footing</strong></h3>



<p>Since Monday’s broad sell-off, major cryptos have slowly regained footing. Bitcoin and ethereum have made modest gains, advancing 3% and 4% in the afternoon.&nbsp;</p>



<p>&#8220;Evergrande seems to be supported by mainland China&#8217;s banks for the time being, assuaging much of the market&#8217;s concerns about triggering a 2008 Lehman&#8217;s Brother-style effect on the global markets,” said Edward Deleon, CEO of Anatha. “That said, the strategy of ‘big-budget bailouts or bust’ the world’s leading economies continually find themselves forced to deploy is literally the reason BTC was invented. This should prove net positive for the entire crypto market on the macro scale.”</p>



<hr class="wp-block-separator"/>



<p><strong>Are you a UK or EU reader that can’t get enough investor-focused content on digital assets?<a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Join us</a>&nbsp;in London on November 15th and 16th for the Digital Asset Summit (DAS) London. Use code ARTICLE for £75 off your ticket.&nbsp;<a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Buy it now</a>.</strong></p>



<hr class="wp-block-separator"/>


Report: Chinese Authorities May Be Preparing for Evergrande’s Collapse

Casey Wagner

<div id="highlights-block_6148b053099e8" class="highlights">
        <ul>
                <li>Crypto market cap sinks amid the Chinese real estate giant’s debt crisis</li>
                <li>Equities globally are headed for their worst day in two months </li>
            </ul>
    
</div>



<p>Cryptocurrencies dipped lower Monday in a broad sell-off many analysts attribute to growing concerns over China Evergrande Group’s <a href="https://cms.blockworks.co/evergrande-is-suspending-trades-friday-heres-what-that-means/" target="_blank" rel="noreferrer noopener">debt crisis</a> and contagion fears.&nbsp;</p>



<p>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.&nbsp;</p>



<p>“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&#8217;s kind of what we&#8217;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.”</p>



<p>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&#8217; co-founder Mike Ippolito.</p>



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true"><p lang="en" dir="ltr">.<a href="https://twitter.com/MarkYusko?ref_src=twsrc%5Etfw">@MarkYusko</a>&#39;s analysis on Evergrande:<br><br>It was never good debt to begin with. <br><br>It was handouts to the super-rich part of the political bureau (the senators)<br><br>In 2005 they had to bail out the banks just like we bailed our banks in 2009.<br><br>Full video:<a href="https://t.co/ZZrDktznhw">https://t.co/ZZrDktznhw</a> <a href="https://t.co/nPG0n8oTF9">pic.twitter.com/nPG0n8oTF9</a></p>&mdash; Blockworks (@Blockworks_) <a href="https://twitter.com/Blockworks_/status/1439993866040627211?ref_src=twsrc%5Etfw">September 20, 2021</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



<h3 class="wp-block-heading">Risk on, risk off</h3>



<p>Stocks globally were trading lower on Monday with the Dow Jones Industrial Index and the S&amp;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.&nbsp;</p>



<p>“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&#8217;s warranted or not, has the entire market fixated on this one thing and the fallout from it.”</p>



<p>Evergrande’s potential impact on the digital asset space is indicative of crypto’s status as an asset class, Lim said.&nbsp;</p>



<blockquote class="wp-block-quote"><p><strong>“​​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.</strong>&nbsp;</p></blockquote>



<p>Evergrande&#8217;s debt load stands somewhere north of <a href="https://www.nytimes.com/2021/09/19/business/china-evergrande-debt-protests.html" target="_blank" rel="noreferrer noopener">$300 billion dollars</a>, 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.</p>



<p>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 <a href="https://www.bloomberg.com/news/articles/2021-08-30/inside-the-huarong-bailout-that-rocked-china-s-financial-elite" target="_blank" rel="noreferrer noopener">Bloomberg News called</a> a &#8220;culmination of months of bureaucratic infighting, ego-flexing and buck-passing.&#8221;</p>



<p>Evergrande shares were down 10% at the time of publication.</p>



<hr class="wp-block-separator">
<p><strong>Are you a UK or EU reader that can’t get enough investor-focused content on digital assets?<a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Join us</a>&nbsp;in London on November 15th and 16th for the Digital Asset Summit (DAS) London. Use code ARTICLE for £75 off your ticket.&nbsp;<a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Buy it now</a>.</strong></p>
<hr class="wp-block-separator">


Crypto Market Loses $250 Billion as Evergrande Fears Mount


<p>In the weekly roundup episode of Blockworks&#8217; podcast &#8220;<a href="https://youtu.be/lUSorYpicwE" target="_blank" rel="noreferrer noopener">On the Margin</a>,&#8221; Mike and Mark get deep into the Evergrande saga. They take a look at credit conditions in China&#8217;s property sector, and dive into whether or not contagion is likely to spread into adjacent markets.  </p>



<p>They also cover:</p>



<ul><li>Tesla and SpaceX</li><li>The adoption curve of crypto vs the internet</li><li>The talent migration coming into digital assets.</li></ul>



<p>Watch the full episode below! 👇</p>



<figure class="wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio"><div class="wp-block-embed__wrapper">
<iframe loading="lazy" title="Evergrande Implosion, Crypto vs Internet Growth, 800 Year History of Inflation" width="1024" height="576" src="https://www.youtube.com/embed/lUSorYpicwE?feature=oembed" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>
</div></figure>



<p>&#8220;On the Margin&#8221; is a two-part show.&nbsp;Once a week, Mike interviews industry experts, and then at the end of the week he is joined by co-host Mark Yusko where they break down the top crypto and macro stories. Episodes go live every Wednesday and Saturday morning.</p>



<p>Subscribe to &#8220;On the Margin&#8221; today on <a href="https://podcasts.apple.com/us/podcast/lyn-alden-explains-connection-between-inflation-bitcoin/id1558223079?i=1000513411286" target="_blank" rel="noreferrer noopener">Apple</a> or <a href="https://spoti.fi/3bTa9uw" target="_blank" rel="noreferrer noopener">Spotify</a>, or watch episodes on <a href="https://youtube.com/playlist?list=PLvER9nHSRN3xVs_p-dl7L7K_ZgL6lSudu" target="_blank" rel="noreferrer noopener">YouTube</a>.</p>



<p><strong>Are you a UK or EU reader that cant get enough investor-focused content on digital assets?<a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Join us</a>&nbsp;in London on November 15th and 16th for the Digital Asset Summit (DAS) London. Use code ARTICLE for £75 off your ticket.&nbsp;<a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Buy it now</a>.</strong></p>


Podcast: Evergrande Implosion, 800 Years of Inflation, and Crypto v. Web Growth

Liz Coyne


<p>In the weekly roundup episode of Blockworks&#8217; podcast &#8220;<a href="https://www.youtube.com/watch?v=HM64XN3Zkns" target="_blank" rel="noreferrer noopener">On the Margin</a>,&#8221; Michael Ippolito, co-founder, sits down with Economic Strategist Tyler Neville to talk about the news in macro, including JPMorgan&#8217;s new crypto stock offering, China&#8217;s clampdown on education companies, and Evergrande&#8217;s growing debt concerns and the potential connection to tether.</p>



<p>They covered:  </p>



<ul><li>Charts like the 10-year, BTC &amp; ETH this week</li><li>China&#8217;s economic momentum</li><li>JPMorgan&#8217;s new crypto stock offering</li><li>China&#8217;s clampdown on education companies</li><li>Evergrande&#8217;s growing debt concerns</li><li>Speculation around Tether</li><li>The politics of inflation</li></ul>



<figure class="wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio"><div class="wp-block-embed__wrapper">
<iframe loading="lazy" title="JP Morgan Offers Crypto, China Education Clampdown, Evergrande Debt Reckoning" width="1024" height="576" src="https://www.youtube.com/embed/HM64XN3Zkns?feature=oembed" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>
</div></figure>



<p>&#8220;On the Margin&#8221; is a two-part show.&nbsp;Once a week, Mike interviews industry experts, and then at the end of the week he is joined by co-host <a href="https://cms.blockworks.co/newsletter/" target="_blank" rel="noreferrer noopener">Tyler Neville</a> where they break down the top crypto and macro stories. Episodes go live every Wednesday and Saturday morning.</p>



<p>Subscribe to &#8220;On the Margin&#8221; today on <a href="https://podcasts.apple.com/us/podcast/lyn-alden-explains-connection-between-inflation-bitcoin/id1558223079?i=1000513411286" target="_blank" rel="noreferrer noopener">Apple</a> or <a href="https://spoti.fi/3bTa9uw" target="_blank" rel="noreferrer noopener">Spotify</a>, or watch episodes on <a href="https://youtube.com/playlist?list=PLvER9nHSRN3xVs_p-dl7L7K_ZgL6lSudu" target="_blank" rel="noreferrer noopener">YouTube</a>.</p>
