Will It Fall Below $40,000 Again? Bitcoin and Ethereum Decline Amid Evergrande Shock

[Asia Economy Reporter Joselgina] The shock from Evergrande Group, China's largest real estate developer, continues for the second consecutive day in the cryptocurrency market. Bitcoin, which had plunged sharply amid the escalating bankruptcy crisis of Evergrande Group, barely recovered to the $40,000 level on the 22nd. Experts expect the downward trend to continue until later this week.

As of 8:47 a.m. Korea time, Bitcoin was trading at around $40,280, down 5.83% from the previous day, according to CoinMarketCap, a global cryptocurrency market tracking site. The $40,000 level briefly collapsed around 6:30 a.m. but was recovered again. Experts noted that although Bitcoin's market trend still shows a decline, it appears to be supported at the $40,000 level. This is the first time Bitcoin's price has fallen below $40,000 since early August.

At the same time, Ethereum was also trading around $2,726, down 8.13% from the previous day.

The cryptocurrency market experienced a nearly 10% plunge the previous day as risk-averse sentiment spread due to the bankruptcy rumors of Evergrande Group. While global stock markets showed signs of recovering somewhat from the Evergrande shock, cryptocurrencies remain in a downward trend. This is interpreted as a result of not only concerns over the Evergrande shock but also uncertainties regarding the U.S. Federal Reserve's (Fed) policies.

Rick Rieder, Chief Investment Officer (CIO) of BlackRock, the world's largest asset management firm, warned that "(the Evergrande Group crisis) will bring increased volatility to financial markets." International credit rating agency S&P predicted that since the Chinese government is not providing direct support to Evergrande Group, this incident could serve as a warning to domestic companies burdened with excessive debt. Evergrande Group, which is facing a liquidity crisis due to overexpansion, will default if it fails to pay $119 million in interest due on the 23rd.

Currently, investors are also closely watching the results of the FOMC regular meeting, as the Fed is expected to hint at tapering its asset purchase program. Attention is also focused on whether the newly released dot plot in this meeting will indicate an accelerated timeline for interest rate hikes. Forbes reported, "Evergrande Group's bankruptcy could rapidly worsen the global economy," adding that "Fed policy uncertainties are negatively affecting securities and cryptocurrency markets."

However, there are also positive outlooks. Mike Novogratz, CEO of Galaxy Digital, mentioned in an interview with CNBC that "the fundamental demand from institutional investors remains intact." Katie Stockton of Fairlead Strategies assessed the current situation as short-term volatility, stating in a report that "the long-term upward trend is maintained in Bitcoin."