The growing property crisis in China, highlighted by the troubling Evergrande bankruptcy, is reportedly spreading to the financial sector. This China property crisis is cited as one of the potential factors behind the broader risk assets’ decline, particularly the sharp drop in bitcoin following a prolonged consolidation period after a somewhat exaggerated surge on news of BlackRock’s Bitcoin spot ETF application.
China, one of the world’s largest economies, is currently facing a number of challenges affecting its domestic and international economic landscape. Growing fears of a possible “Lehman moment” (referring to the bankruptcy of Lehman Brothers, which triggered an acute phase of the Great Recession in 2008) are alarming investors and economists alike.
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Idle factories amid rising production costs, shifting global trade dynamics, and an aging labor force have contributed to China’s shrinking output, as Peter St. Onge highlighted recently. This calls into question the sustainability of China’s previous growth model (see brilliant Arthur Heyes’ explanation here) and raises concerns about the potential challenges during the country’s shift towards a consumption-driven economy.
The interconnectedness of the world’s financial systems means that a crisis in China could have far-reaching consequences, so it may also be bad news for Bitcoin in the longer term.
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We have yet to find out if the rest of the world can function without China growing five to eight percent per year and what happens if China starts offloading its US treasuries. Like Cointelegraph’s analyst, we don’t have the answer to those concerns, and likely no one does. But it looks like a possible source of a significant headwind for Bitcoin short to midterm if China’s crisis develops and has a global impact.
From a technical perspective, yes, we can agree with @CryptoMichNL, but Swissblock analysts have noted that their proprietary Risk Signal is now at 100, meaning the risk of a pronounced drop is extremely high. So in their fresh analysis, they offer two possible short-term painful scenarios instead:
- Slow bleed to $24.8k - $25k
- Fast, aggressive wick that gets bought up fast
(Source: Swissblock Insights)
Either way, “we’ll bottom out shortly after one of the scenarios above plays out.”
‘When In Doubt, Zoom Out’
…or your well-deserved dose of hopium at the end:
How Not To Suck At Trading
Tactical trading is hard. Risk management and position sizing are key. Without proper risk management and position sizing, you will suck at trading on a distance.
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