Amidst the news that Bitcoin seems to be reinforcing its current position and may start gaining in the nearest future, a new story starts causing a commotion in the financial world. We all know about the economic crisis that the Chinese government will have to face in the nearest future. While the US economy has not yet felt the shockwave that will hit very soon, the first line to fall is the group of Chinese companies publicly traded on the NYSE.
The notable issue with the Chinese crisis is its similarity to what happened in the US in 2008 when the real estate market collapsed and brought down the house of cards built upon endless chains of bonds. In China, the problem was in companies like Evergrande, one of the biggest real estate developers in the country. Evergrande started a Ponzi scheme and received loans by using prior payments as collateral.
When the COVID-19 pandemic hit China and many mortgage payers wanted to move into their properties, they found out that the developer did not finish them. Now, the whole real estate development sector is in disarray since Evergrande was not the only one using this shady tactic. All developers were using this method and now all of them cannot pay back international loans and obligations on bonds.
The US government decided to conduct an audit of companies that are now publicly traded on the NYSE. Evergrande has already tanked spectacularly, but other companies remain stable. However, when the US inspection reveals shortcomings in the accounting books of other publicly traded enterprises, we might see a fiasco of an unprecedented scale!
The ripple effect of Chinese companies exiting from NYSE can be devastating for the US economy in the short-term, but it opens up opportunities for bulls in the crypto market to push with renewed strength as investors might want to hedge against the US dollar by investing in Bitcoin and Ethereum. It is a trend that we observe in many countries with weakening national currencies. While the inflation in the US will probably be kept in check, it is still possible for the dollar to suffer from the fallout of the Chinese crisis.
