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Highlights
- China's CSI 1000 index dropped more than 8% on Monday
- Historically, volatility in Chinese financial markets has always tampered with crypto market sentiments
One of the most looked upon economies in the world, China is currently facing uncertainties regarding its financial prospects. China’s CSI 1000 index dropped more than 8% on Monday making it hit lowest in years. The country also just saw the liquidation order of its biggest real estate developer China Evergrande. With looming uncertainties in government-backed assets and regulated markets, China is likely to see a shift in its crypto domains.
Stocks tumble in China to lowest level in years
According to CNN Business, mainland China saw another decline in stock markets following the worst week in years. A third of all equities listed in China, or over 1,800 stocks, fell more than 10% on the Shanghai and Shenzhen exchanges. After being under pressure for a while, China’s CSI 1000 index dropped more than 8% in a matter of hours on Monday. The large-cap index, like the CSI 100, was up 1.03 percent at 3,042.52, but the index fell nearly 400 points, or 8.68%, to a low of 4,177.94. The CSI1000 index has dropped by 27% so far in January.
The slump in the Chinese stock market has also pressured other stocks in the Asian region, especially those in the emerging market region.
The Evergrande fallout
Another big hit to the Chinese economy recently was the liquidation order of its biggest real estate developer China Evergrande. China Evergrande Group, the world’s most indebted real estate developer, had been ordered by a Hong Kong court to liquidate. The demise of what was once the world’s largest real estate company in China has shocked people everywhere. As China’s faltering real estate sector continues to strain the nation’s economy, the liquidation further erodes investor trust.
China’s Economic woes to push changes in crypto markets
It is hardly shocking that Evergrande’s bankruptcy and China’s stock slump will destabilize the Chinese real estate and financial markets. Furthermore, it will exert pressure on global financial markets. The cryptocurrency markets will not be an exception to this change of events.
Historically, volatility in Chinese financial markets has always tampered with crypto market sentiments. The debt restructuring decision made by Evergrande for example hurt Bitcoin prices and investor mood. As the country undergoes economic turmoil, investor interest in riskier assets may decline as a result. This might cause Bitcoin prices to fluctuate in the future and also a fall in investment by market participants.
On the other hand, investors can also be attempting to protect their capital from stock markets. In a secondary scenario, investors pulling their money out of the share market could cause the market to brace itself for a decline in stock prices. In such a scenario, as more people look to protect their finances, cryptocurrency investments may increase.
Chinese investors resort to third-party dealers for crypto investors
Since 2021, mining and trading cryptocurrency has been prohibited in China. Reuters did, however, previously disclose that an increasing number of investors are buying cryptocurrencies via Chinese grey-market vendors. Typically, small rural commercial banks offer bank cards that are used in the illicit trade.
Although it is illegal to utilize cryptocurrencies on the Chinese mainland and there are tight regulations on cross-border money movements, users can nonetheless trade tokens like bitcoin over the counter or on exchanges like OKX and Binance. Foreign bank accounts can also be opened by mainland investors to purchase cryptocurrency assets. Chinese people are already putting money into cryptocurrency accounts within the territory by using their yearly limit of $50,000 for international purchases, in response to Hong Kong’s official backing of digital assets last year.
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