Bitcoin, Stocks Largely Unmoved as China Evergrande is Declared in Default
The price of bitcoin (BTC) and US stock futures are largely unmoved today after the expected news broke that Chinese property development giant Evergrande for the first time has failed to pay off a US dollar-denominated debt obligation.
The news that Evergrande has defaulted was first reported around 09:00 UTC, after the major financial ratings agency Fitch earlier in the morning published a note on its website saying that the company has been downgraded to “restricted default.”
The downgrade by Fitch applies to Evergrande, as well as its subsidiaries Hengda Real Estate Group Co., Ltd and Tianji Holding Limited, the update said.
According to Fitch, the downgrade is a result of a failure by the company to pay coupons due on November 6 after a grace period that ended on December 6 for two bonds worth USD 645 and USD 590, respectively.
“There has been no announcement from the company or the trustee regarding the coupon payments,” Fitch wrote, adding that the company has not responded to requests for confirmation of that payment has been made.
“We are therefore assuming they were not paid,” the ratings agency added.
At 12:16 UTC on Thursday, bitcoin was unchanged over the past 24 hours at a price of USD 49,213. Following the news of Evergrande’s default, the coin dropped to as low as 48,898, before later trimming its losses.
At the same time, US S&P 500 stock futures were also down slightly, falling by about 0.15% since 09:00 UTC.
1-hour chart of BTC/USD on the left and S&P 500 futures on the right:
Evergrande’s history of financial difficulties has for months rattled global financial markets.
In September, nervousness related to a potential default for Evergrande caused a significant drop for both bitcoin and stocks. At the time, Alex Mashinsky, founder & CEO of crypto lending and borrowing firm Celsius Network said that “a cascade of defaults in the global financial system” could drag bitcoin down with it.
Following today’s restricted default declaration by Fitch, however, the sentiment among members of the crypto community appeared to be that the news was already widely expected, and possibly priced in by the market.
If you were following the news it was wildly expected. So no reason to panic.. https://t.co/DzvuUc2JQ1— CoinMamba (@coinmamba) December 9, 2021
To the surprise of nobody. https://t.co/nRaX7z7iMe— Loma (@LomahCrypto) December 9, 2021
However, some also warned that the news could lead to sharp moves in bitcoin, with for instance Jan Wuestenfeld, an on-chain analyst at analysis website CryptoQuant, writing “Prepare for some volatility. Bitcoin.”
The company, which is widely considered the world’s most indebted property developer, still has liabilities exceeding USD 300bn. The default declared by Fitch today follows a statement from the company last Friday where it said it could no guarantee “to perform its financial obligations.”
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