Another Fall of Crypto, Evergrande and Metals

21 Sep 2021

Yesterday in the financial markets there was only talk about the upcoming default of one of the largest developers in China, Evegrande. We already wrote about this last week, but the situation has become actual, since the moment of truth will come on Thursday. Many still hope that the Chinese authorities will step in and save the company. "Too big to fail" - that's all. Indeed, the company owes not only investment funds, but also banks, suppliers and even households. So far, it is difficult to assess the scale of the potential damage from the default of the company, but it will hardly seem certain just based on the volume of the company (over 300 billion in liabilities and 1,300+ real estate objects throughout China).

Over the weekend, US Treasury Secretary Jannette Yellen recalled another potential default. This time we are talking about the US state, which runs the risk of being in a situation of inability to pay its bills in October, if the government debt ceiling is not raised by legislators.

So most of the risky assets were uncomfortable yesterday, while safe-haven assets such as the Japanese yen and gold were in high demand.

Yesterday was very revealing in terms of debunking the myth that cryptocurrencies are the newest member of the safe-haven asset class.

So, against the background of growing demand for safe-haven assets, crypt was sold on all fronts. The scale of the decline reached 10% +. Just in case, we recall that the risky assets today are just cryptocurrencies and overbought stock markets, as well as overheated commodity markets.

By the way, about the commodity markets. Iron ore prices collapsed last week, losing over 20%. The overall scale of the fall over the past few months has already exceeded 50%. In general, one more bubble in the commodity markets has decreased. Bubbles deflate in platinum and palladium markets. But there, the story is tied to the problems of the automotive sector amid a shortage of semiconductors.

However, there are still plenty of bubbles among commodity assets. This is primarily about natural gas, but oil is still quite expensive. But the United States is more and more actively recovering after Hurricane Ida. 75% of production on the Gulf Coast has already been restored.