Ticking Chinese time bomb could crash stocks and crypto

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Last Updated on 6 November 2023 by CryptoTips.eu

After a lousy week for both exchanges and Bitcoin, it was time for contemplation and rest this weekend. As the largest digital coin moved between $25 and $27k, I took a look around to see if I could find the culprit for this renewed volatility in stocks and crypto.

Many analysts point to the ticking time bomb that the Chinese economy has become, and the words ‘Lehman’ and ‘moment’ are used a little too much in the same sentence for my liking. Usually, if you see those two together, it’s time to panic. Let’s explain.

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Genesis

Back in 2009, Bitcoin was developed to create a new digital currency that central banks would have no control over. Anonymous creator Satoshi Nakamoto clearly disagreed with the (taxpayer funded) bailouts banks received at the end of the 2007-2008 financial crisis. In the famous Genesis block of Bitcoin (the very first minted ‘block’ of the ‘chain’) there is a reference to an article from the Times of London from that time, about the bailouts of banks.

In other words, Satoshi disagreed with the solution to a global banking crisis, one that was primarily caused by a housing crisis. The major bank that was the first to collapse was Lehman Brothers in the United States, where the housing crisis also started. Subsequently, substantial falls in property prices were later also seen in Spain, Greece and Ireland. Banks had a very hard time staying afloat. Ever since then, the onset of any systemic risk to a major economy has been described as a “Lehman moment.”

Unemployment

This time the major country at hand is China, where this week real estate giant Evergrande (which had been in trouble for some time) was finally declared bankrupt. It also appears that China is no longer really willing to provide any clarity about their youth unemployment figures. And finally, a combination of all these factors has led to deflation of the Yuan.

In some strange way, that also provided a bright spot for crypto (which is officially still banned in mainland China), as many Chinese travel to Hong Kong to exchange their Yuan (which is depreciating) for stablecoins (which are linked to the US dollars). Crypto exchange shops are mushrooming in HongKong lately.

However, if China’s economy were to really slide into recession and more real estate giants in the country went bankrupt, it is clear that global stock markets will only go in one direction this fall and winter (and that is down). What all this means for Bitcoin is still unclear. Normally, the largest digital currency moves in tandem with the Nasdaq stock exchange, but as Satoshi invented the coin precisely to provide a solution in crises like this, you never know what will happen in this particular case. So pay close attention if you hear “Lehman moment” a little too often in the coming weeks.

Jeroen Kok

Jeroen is one of the lead copywriters on Cryptotips.eu and discusses all recent events in the crypto market. This includes news updates, but also price analyzes and more. He developed his passion for cryptocurrency during the bull run in 2017. He has learned a lot since then. The combination of cryptocurrency and creative writing is perfect for Jeroen and an excellent way to share his knowledge with a wide audience. Find me on LinkedIn / [email protected]
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