Bitcoin plunged overnight after a sell off that began during the stocks opening intensified this Shanghai morning.
Bitcoin fell from $57,000 to $53,000 when Shanghai woke up this Saturday morning. An apparent nothing during their 9AM (2AM UTC) quickly gave way to an initially slow drop that eventually ended up at a brief $42,000 by lunch time.
Didi maybe did this. The stock has been delisted in USA in a pre-emption of expected orders to delist by Xi Jinping. They will list in Hong Kong where their Hang Seng index is down 13%, falling slightly again on Friday to a new low.
But it isn’t very clear Chinese investors are paying much attention to it as their media isn’t talking much about it. This could however potentially explain the drop during US hours. Didi plunged by 22%. There is speculation other stocks might follow. Alibaba, Baidu and Pinduoduo each fell around 8%.
What Chinese investors might be worried about is Evergrande. That’s the most read article in their financial state media, it stating according to a rough translation:
“With boots landing, Evergrande once again became the focus of market attention.
On the evening of December 3, China Evergrande (03333.HK) issued an announcement on the Hong Kong Stock Exchange stating that it had received a notice requesting the performance of a US$260 million guarantee obligation.
The announcement stated that the company received a notice requesting the performance of a guarantee obligation amounting to US$260 million. In the case of the company’s failure to perform guarantees or other financial responsibilities, it may cause creditors to demand accelerated debt maturity.
The announcement also stated that given the current liquidity situation, the company is not sure whether it has sufficient funds to continue to perform its financial responsibilities. The company will actively communicate with overseas creditors to formulate feasible overseas restructuring plans for all stakeholders.”
Normally, this would be great news for bitcoin. China is deep in debt, with their public and private debt burden being bigger than in USA as a proportion of the GDP. That means their fiat can be trusted less and confidence in their banks should be lower because they’ve obviously overextended and so there may be some losses.
Bitcoin is outside of the banking system and national fiat, so you’d expect people to hedge and bitcoin to gain in relative value.
It has gained, with the question now being what to expect next. Well, China’s GDP is nearly $1 trillion bigger this year than in 2019. A lot of that might be because CNY has appreciated against the dollar, but CNY might have appreciated because of GDP growth.
Unlike the west, China has not taken prolonged economically damaging measures to contain the new flue. They closed some bitcoin mines for example only when we pointed out they were still open last year, and this was at the peak of the lockdown.
Without journalists on the ground it is difficult to ascertain what exactly is going on there, but one thing appears very clear: China is less damaged economically by the new flue than the west.
This growth should mean more funds to invest in bitcoin, but Chinese citizens are being removed from what we tend to see as Chinese exchanges, like Binance and Huobi, but not all of them.
Some speculate this is putting downward pressure on price as they have to withdraw by the end of the month, but this is old news with limited effects where not all exchanges are affected and Chinese citizens have already found new loopholes.
So it doesn’t explain at all that sudden red candle. Evergrande might, but how on earth are debt troubles bad for bitcoin, is anyone’s guess. Bears speculate Tether has Evergrande commercial paper, which Tether has denied, but even if tether went down that would mean a pump for bitcoin as everyone would go from USDt to BTC.
Tea Leaf Analysts (TA) traders however wanted all this so maybe they partially caused it, but in that case it might be temporary with the big question this year being whether bitcoin has gotten off the hyperbull and hyperbear cycle to now be more bull and bear, albeit with +50% and -50% movements in months.
Something that could suggest this is temporary and perhaps a re-adjustment as both stocks and cryptos wait to see whether there will be more restrictions and whether that will also mean more printing.
Overall however, this might just be bitcoin bitcoining, but clearly the market is a bit uneasy as they don’t know what politicians will do, leaving room for plenty of speculation.