After Evergrande, Country Garden, which was once regarded as a model student in the industry, also has debt problems, causing China's real estate industry to explode one after another. Some even say that the cryptocurrency market and US stocks will be affected sooner or later. Why can China's explosion be discussed together? ? So can investors escape safely? If you have invested in any financial market, this short article is for you!
After the 2008 financial crisis, China's economy has been relying on debt-driven growth to maintain rapid growth. The essence is that they have been frantically using debt-driven development to develop. In other words, keep borrowing money. These debts are mainly absorbed by the real estate industry. why? Because real estate is a very large "money pool." The government, real estate developers, and home buyers all have something to gain from this game. But here’s the problem, this money pool has become increasingly unstable.
But everyone knows that trees can’t grow to the sky, and similarly, this debt-driven model is unsustainable. Recently, China's real estate market has shown weakness due to global economic pressure, tightening liquidity, and the impact of the epidemic. The recent problems of large real estate companies such as Evergrande and Country Garden are just the tip of the iceberg. So, what does this mean for us cryptocurrency investors? In the short term, turbulence in China's economy may trigger volatility in global markets, and the cryptocurrency market is no exception. But in the long run, this might actually be a good thing!
Therefore, although the rapid decline of China's economy is a negative factor for global stock markets, it is not the most critical factor. Because the most important boss that dominates global risk assets is the Federal Reserve! Any event that could lead to the Fed abandoning its current high interest rate policy would be a real positive for our cryptocurrencies. Because if the global economy falls into crisis, the one most likely to save the day is the Federal Reserve. How will they act? you guessed right! Sharp interest rate cuts. Then some friends may ask, does Chu decide his own monetary policy every year because of the situation in China? The answer is yes!
The Federal Reserve did this in 2015, because the Federal Reserve is essentially the world's central bank, because the United States is the world's reserve currency. so so! If the Federal Reserve begins cutting interest rates or implementing quantitative easing in response to the global economic downturn, this would be a huge positive for cryptocurrencies. Why? Because low interest rates and loose monetary policy will prompt more funds to flow into riskier asset classes, such as cryptocurrencies.
Therefore, dear friends, this is not the time to panic sell, but it may be a golden buying opportunity! ! ! !