{"id":340023,"date":"2021-09-16T12:26:21","date_gmt":"2021-09-16T09:26:21","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/does-evergrandes-300b-debt-crisis-pose-systemic-risk-to-crypto-industry\/"},"modified":"2021-09-16T12:26:21","modified_gmt":"2021-09-16T09:26:21","slug":"does-evergrandes-300b-debt-crisis-pose-systemic-risk-to-crypto-industry","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/does-evergrandes-300b-debt-crisis-pose-systemic-risk-to-crypto-industry\/","title":{"rendered":"# Does Evergrande\u2019s $300B debt crisis pose systemic risk to crypto industry?"},"content":{"rendered":"

“# Does Evergrande\u2019s $300B debt crisis pose systemic risk to crypto industry? <\/strong>”
\n<\/p>\n

Amid speculation as to whether China’s second-largest property developer, Evergrande Group, will default on its $300 billion in debts, analysts are wondering whether the firm\u2019s collapse could pose contagion risks for the crypto industry.<\/p>\n

On Sept. 8, Fitch Ratings asserted<\/a> it \u201capp<\/a>ears probable\u201d that Evergrande will default on its debts, with the firm having since conceded<\/a> that it will not be able to sell properties or other assets in its possession quickly enough to service its rapidly mounting debts. <\/p>\n

A Sept. 14 statement from Evergrande predicts \u201csignificant continuing decline in contract sales in September, thereby resulting in the continuous deterioration of cash collection by the Group\u201d and placing \u201ctremendous pressure on the Group\u2019s cash flow and liquidity.\u201d The document added:<\/p>\n

\u201cIn view of the difficulties, challenges and uncertainties in improving its liquidity as mentioned above, there is no guarantee that the Group will be able to meet its financial obligations.\u201d\u00a0<\/p><\/blockquote>\n

Australian economist David Llewellyn-Smith recently speculated that leading stablecoin issuer Tether (USDT) may have exposure to commercial paper issued by the \u201c$300bn debt monster,\u201d warning<\/a> that Bitcoin (BTC) may comprise one of Entergrande\u2019s counterparties through USDT\u2019s dominance as a BTC pairing. Tether has denied this however.<\/p>\n

Tether\u2019s latest attestation report suggested $30.8 billion of its $62.8 billion in assets are held in commercial paper, with Financial Times estimating<\/a> the company would rank among the instrument\u2019s top 10 holders worldwide. <\/p>\n

Despite Tether\u2019s claims that it doesn\u2019t hold any commercial paper issued by Evergrande, Cinneamhain Ventures partner Adam Cochran emphasized<\/a> that an Evergrande default would \u201chave a huge impact on the commercial paper market\u201d broadly.<\/p>\n

Onlookers fear that Evergrande\u2019s collapse could have far-reaching implications for the commercial paper market, with Reuters describing<\/a> the firm as \u201cthe biggest issuer of commercial papers\u201d representing $32 billion worth of the asset as of late 2020.<\/p>\n

\u201cCurrently both Tether and Circle hold commercial paper, and while I think it unlikely that either would have large swaths of Evergrande bonds, the whole market will reel a bit.\u201d<\/p><\/blockquote>\n

\u201cI do think both of those will still have more than enough wiggle room to prevent any actual meltdown, but if we have a meltdown that gets really bad, they certainly could get a bit off peg,\u201d he added.<\/p>\n

July audits of USD Coin (USDC) issuer Circle revealed that 9% of the firm’s assets were then held in commercial paper.<\/p>\n

Related: <\/em><\/strong>USDC to consolidate reserves into cash and US treasuries<\/em><\/strong><\/p>\n

Senior trader at Australian crypto investment firm Zerocap, William Fong, predicts that Evergrande\u2019s debt crisis will culminate in default and government intervention, suggesting the wholesale economic collapse some onlookers are anticipating is unlikely.<\/p>\n

\u201cMore likely is that the group goes into administration and the fall is cushioned by the authorities,\u201d he said, adding it’s highly unlikely that Evergrande bondholders will see full repayment.<\/p>\n

Fong believes the potential fall-out for the crypto industry should Evergrande default remains to be seen, noting that some investors \u201cmay diversify away from traditional bond market allocations into less correlated asset classes.\u201d<\/p>\n

However, investors \u201ccould also shift funding into safe-haven assets such as U.S. Treasury debt,\u201d he added.<\/p>\n

Other analysts believe Evergrande is already causing havoc in the international markets, with Bloomberg\u2019s Tracy Alloway noting that yields on junk-rated debt have spiked to their highest level since March 2020.<\/p>\n

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China Evergrande concerns are rippling through markets after the company halted trading of its onshore bonds,<\/p>\n

– Shares of other Chinese property developers & banks are falling
– Yields on junk-rated debt spike to the highest since March 2020https:\/\/t.co\/qHuXB37uNF<\/a> by @SofiaHC1<\/a> pic.twitter.com\/mmEExxnhnu<\/a><\/p>\n

\u2014 Tracy Alloway (@tracyalloway) September 16, 2021<\/a><\/p><\/blockquote>\n