Global demand for cryptocurrencies has plunged as the possible collapse of China‘s second biggest apartment developer, Evergrande, frightens investors.
Bitcoin, the benchmark blockchain denomination, plummeted overnight from $AUD64,700 to four-month low levels below $56,000.
A glut of ‘ghost city’ apartment towers in China is stirring fears about major economic problems should the conglomerate collapse.
Australia’s share market and the big miners aren’t the only ones being affected by the fall with the global cryptocurrency market collectively losing $344billion since Monday night, with Ethereum, Tether and Cardano also affected.
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Global demand for cryptocurrencies has plunged as the possible collapse of China’s second biggest apartment developer scares investors (pictured is a stock image of a Bitcoin)
BTC Markets chief executive Caroline Bowler said like traditional share market investors, cryptocurrency buyers were also worried about a slowdown in global economic growth.
‘What’s happening in China and that sense of contagion is perhaps impacting on to Bitcoin prices,’ she told Daily Mail Australia.
‘In turn, when Bitcoin goes south, the rest of the cryptocurrencies tend to follow suit with it.’
Adding to fears are rumours cryptocurrency Tether holds substantial reserves of Evergrande corporate debt which it has strenuously denied.
Nonetheless Ms Bowler, who runs a cryptocurrency trading platform, said this had created fear among digital currency investors.
‘There is reportedly an exposure from Tether – they have corporate reserves, some of their reserves that they hold for US dollars could potentially be held in Evergrande,’ she said.
‘That’s one of the potential scenarios that’s being discussed at the moment in the industry and then there’s that knock-on impact if that turns out to be the case.’
More so than shares, cryptocurrency investors are used to volatility.
Bitcoin, the benchmark blockchain denomination, has overnight plummeted from $64,700 to four-month levels below $56,000 after Evergrande missed an interest payment deadline (pictured is Evergrande’s halted Cultural Tourism City in Suzhou)
BTC Markets chief executive Caroline Bowler said like traditional share market investors, cryptocurrency buyers were also worried about a slowdown in global economic growth
In May, Bitcoin dived from $74,000 to $50,000 after billionaire Elon Musk changed his mind about accepting the cryptocurrency as payment for his Telsa electric cars.
Musk argued too many fossil fuels were used in crypto mining, which involves solving very complex mathematical equations.
Despite the overnight fall, Bitcoin at $59,000 is well above the $15,000 level of a year ago, and bargain hunters are now taking advantage, with the cryptocurrency well above its overnight low of $55,800.
‘People are coming in and putting in their buys,’ Ms Bowler said.
‘The thing to keep in mind, for crypto industry people who’ve been around for some period of time, this volatility is quite normal.’
The volatility from Evergrande saw Ethereum used for business transactions dive from $4,583 to an overnight low of $3,910 before recovering to $4,313.
Bitcoin in May dived from $74,000 to $50,000 after billionaire Elon Musk changed his mind about accepting the cryptocurrency as payment for his Telsa electric cars
Despite being the subject of Evergrande corporate debt rumours, Tether traded within a tight range of $1.3824 to $1.3760.
Likewise for Cardano which fell from $3.06 to $2.74 before recovering to $2.92.
Meanwhile, on the stock market, Evergrande’s shares have dropped 80 per cent this year and 19 per cent within just the past 24 hours.
Ms Bowler said investors in cryptocurrency were more worried about inflation and embraced decentralised finance as a hedge as sharp price rises.
A cutback in Chinese steel production, to meet climate change targets of net zero by 2060, has some investors worried about the cost of consumer goods going up.
‘With Bitcoin in particular, it’s often in terms to do with inflation and how people perceive where inflation’s going to go,’ Ms Bowler said.
‘It’s no longer just a question of Elon Musk tweeting.’