Emin Gun Sirer expressed: “Is this the day when the crypto markets realize that they are far more resilient to Chinese real estate developers than they think they are?”

Community response:  No, because if there will be a collapse for Evergrande, it will affect all economies in the world included crypto era.

Some say the opposite that it will not have a global effect and that even Communist government wants it to collapse to be able to shift the money from construction to semiconductors and other tech fields.

In the long term, the Chinese government seems to be happy with the macroeconomic consequence of the controlled demolition of Evergrande for a few reasons. 1. It helps to free the liquidity from the real-estate black hole to be channeled into more productive industries such as semiconductors, biotech etc. 2. Debt-to-equity/ownership conversion goes along with the overall trend of nationalizing high-quality assets in China. 3. It seems to accomplish the geopolitical goal of not rewarding Australia with higher iron prices.

As a result, the likelihood of an Evergrande rescue is currently <2%. Restructuring, and a partial nationalization over a 2-3 year time-frame is probably the path of least resistance. And, the contagion effect to the US market is likely to be minimum.

Practically, after the short-term emotional sell-off is over, US equity market is probably going back to whatever track it was on before the Evergrande default.

Many of the upper management of Evergrande somehow managed to pull off early-redemption of their own shares of these high-yield products. And now Evergrande pretends to get some change back from these folks.

Protestors are probably very busy right now, trying to figure out the actual value of these “in-kind” properties as repayment before the Oct 1st holiday, and the most newsworthy part of the crisis may take a break next week.

To put this into context, the APR of these wealth-management products vary between 14%-25% on their original term sheet. And, many of those “in-kind” properties are located in some relatively remote part of China (i.e. 4-5th tier cities).

It will now repay these debtors (40Bn RMB) over 10 quarters @ 0% APR, or in-kind using condos/retail-space/parking-space that are still under construction (30-50% chance that they may never finish), or to offset future payments debtors may owe to Evergrande.

The default on these wealth-management product (40Bn RMB) is no small matter, but the bigger issue is the 2Tr RMB liability of the entire company. Right now, Evergrande consider this crisis as a liquidity crisis, i.e. its asset value > its liability

The protests have been disproportionally over-covered by the media, because most of the holds of these now toxic assets are friends & families of the current employees of Evergrande. i.e. people with some insider knowledge on how to make the company look bad.

The Evergrande incident did shake the crypto space a bit, but as Emin says, crypto markets would prove their resilience.