How much of it is Chinese or specifically from Evergrande is unclear.īut the team at Tether has been very tight-lipped about the origin of the commercial paper. In fact, Tether claimed earlier in the year that 50% of its reserves come from commercial paper. Tether, a Hong-Kong based cryptocurrency that tracks the value of the US dollar (called a “stablecoin”), is backed by a significant amount of Chinese commercial paper. The reality is that the company won’t be able to liquidate enough assets in time nor for what they’re currently valued at. Keep in mind, however, that Evergrande just sold its headquarters for a 66% loss. That’s enough to pay creditors if it’s able to liquidate everything. As of August 31 st, Evergrande only had roughly $355 billion in total assets. A bailout from the Chinese government will be required to save the company, which owes roughly $305 billion in debt. The difference now is that everyone can see the Evergrande bankruptcy developing. Fuld Jr., made similar statements prior to Lehman’s epic $600 billion collapse. Evergrande’s CEO recently held a press conference in which he projected supreme confidence and insisted that the company was doing just fine. The company is essentially doomed to default with billions in debt coming due within the next year. Sadly, Evergrande’s efforts will be in vain.

Evergrande has liquidated assets, even selling its corporate headquarters, to pay said creditors. Creditors have pooled their resources, taking the company to court in an attempt to settle their debts – something that often precedes a bankruptcy declaration. But Evergrande is now well on the path to bankruptcy. It earned this title after the Chinese government banned the company from issuing longer-term debt. In addition to being a major real estate developer, Evergrande is also China’s largest issuer of commercial paper (very short-term corporate bonds). This time around, though, it’s not an American company (like Lehman Brothers) causing problems.Įvergrande, China’s second-largest property developer, is to blame. The market’s “smart money” – investors armed with inside information – could be dumping their crypto portfolios in anticipation of another financial crisis. Today’s selling may have been sparked by a poor morning trading session for stocks.īut the majority of the crypto losses that followed were likely caused by something else, as equities didn’t drop nearly as much as crypto.

Crypto has more or less tracked the S&P 500 ever since the Covid pandemic began. Bitcoin, Ethereum, and virtually all other digital currencies fell double digits shortly before noon. To add insult to injury, cryptocurrencies crashed shortly after stocks opened for trading. But the next two months carry an outsized risk to growth, policy and the legislative agenda.” “We continue to think this is a ‘normal’ cycle, just hotter and faster, and our cycle model remains in ‘expansion’. “We see a bumpy September-October as the final stages of a mid-cycle transition play out,” explained Morgan Stanley strategists. Morgan Stanley also issued a downgrade of its own this morning, classifying U.S. “The hurdle for strong consumption growth going forward appears much higher: the Delta variant is already weighing on Q3 growth, and fading fiscal stimulus and a slower service sector recovery will both be headwinds in the medium term,” wrote Goldman analysts. its prior 4.1% prediction) by year’s end. Goldman now expects an unemployment rate of 4.2% (vs. Last week’s disappointing August jobs report caused the bank to shift its labor projection, too. Goldman economist Ronnie Walker said that there would be a “harder path” forward in a Monday note to clients before revealing a 5.7% GDP growth forecast for 2021, down from Goldman’s already-reduced 6% estimate. The Wall Street bank trimmed its US GDP outlook, citing “fading fiscal stimulus” and the Delta variant as contributors to a slowed post-Covid recovery.

The first of which being yet another economic downgrade from Goldman Sachs following a previous GDP forecast reduction, issued two weeks ago. Crypto and stocks tumbled this morning as a number of bearish forces converged on market sentiment.

Evergrande defaults