Is the Evergrande crisis pushing Bitcoin, Tether markets on the verge of chaos

Is the Evergrande crisis pushing Bitcoin, Tether markets on the verge of chaos

ambcrypto.com
4 min read
fairly easy
The COVID-19 pandemic managed to bring the world economy on its knees. As countries are still recovering and picking up the pieces, another concern awaits them – the Evergrande Crisis. Owing to its $300 billion worth liabilities, the Evergrande Group has been in the news for quite some time now. At this point, China's second […]
The COVID-19 pandemic managed to bring the world economy on its knees. As countries are still recovering and picking up the pieces, another concern awaits them – the Evergrande Crisis.

Owing to its $300 billion worth liabilities, the Evergrande Group has been in the news for quite some time now. At this point, China's second largest property developer has the potential to fracture the global financial landscape. Right from investors and suppliers to banks and other creditors, the fate of every stakeholder associated with Evergrande remains iffy.

Mounting Debts

Evergrande, a Fortune Global 500 group enterprise, is listed in Hong Kong. Being the face of the real-estate sector in China, Evergrande has more than 1.3k projects spread across the 280 cities across the mainland.

Its debts essentially started rising when the company borrowed to finance other projects under its own umbrella. It further ended up selling apartments at a faster rate with low margins, hoping to raise cash and buy land again. Since 2020, Evergrande has remained China's most indebted real estate company.

As far as this year alone is concerned, the company is liable to pay $670 million. As such, its total liability worth 1.97 trillion yuan [approximately $300 billion] accounts for 2% of China's GDP.

As per data from Y Charts, the average debt-equity ratio of the company currently stands a little over 6. Ideal ratios usually revolve within the 1-1.5 bracket. However, companies in the real estate sector are exposed to more risk and hence their industrial average has more or less revolved around 3.5 over the past few years. By and large, this means Evergrande's growth thus far has been debt-financed, which isn't really a healthy…
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