20 Sep 2021

Global Financial Market Turmoil

Fear looms in the broad financial markets amid the pending Evergrande bankruptcy, and bitcoin behaves like a risk asset, while gold shines like a safe haven asset. A hit for bitcoin’s SoV narrative?
Source: Tradingview
The Chinese property giant Evergrande is currently at the brink of default. Evergrande’s liabilities sit at above $300 billion, reportedly owing money to more than 128 banks and 121 non-banking institutions. This has led the global financial markets into the red, caused by fears of the possible spill-over effects from such a massive bankruptcy.Since the Friday close, the Hang Seng index has fallen 3.86%, while other indexes globally have also seen a substantial sell-off amid the Evergrande crisis. Yesterday, Nasdaq and the S&P 500 closed down 2.2% and 1.7%, respectively.Amid the global market turmoil, gold sees positive returns, as gold tends to do during periods of uncertainty. Gold is up 0.5% since the Friday close, behaving like a safe haven asset.One of bitcoin’s key narratives in the last year has been its store of value properties due to its scarcity. However, it is clear that bitcoin currently behaves like a risk asset in the short run. Bitcoin is currently down 9.9% since Friday in a largely spot-driven sell-off.This is not the first time bitcoin has behaved as a risk asset during looming uncertainty. See March 2020 for example. In March 2020, bitcoin initially saw a massive decline during the global crash. However, we all know what happened with bitcoin in the following 12 months as governments and central banks worldwide initiated fiscal and monetary stimulus to the markets. While bitcoin currently behaves like a risk asset, the market is a device for transferring money from the impatient to the patient. Stay calm.
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