Evergrande — and China’s real, secret power over cryptocurrencies

And how China could become more crypto powerful anyway

N.B. This piece was originally written as a response to a great question from Meiletornado on the Evergrande + Bitcoin article, and wanted to fully flesh out the response and try to evoke more discussion from the Medium #Cryptocurrency community.

Will Evergrande get me rekt?

Evergrande definitely has the strongest potential to contribute to a black swan event.

So why hasn’t it gone truly down yet?

The buffer of huge institutional funds outside of China holding Bitcoin and USDT, is helping. But it’s a buffer, not a flood defence.

We’re watching it play out in slow-motion, especially with China’s recent moves to ban Bitcoin and cryptocurrency trading.

So what? Surely that makes things better for everyone, though? If they’re out of it, they can’t crash it, right?

Not if Evergrande holds cryptocurrencies, and not for Chinese citizens who have assets on exchanges.

The Chinese government haven’t banned themselves from trading crypto.

Why hasn’t Evergrande crashed the market already? Why does the market still exist?

We are still waiting on what might take place if citizen crypto is confiscated by the Chinese Government and flushed on to the market. According to Al-Jazeera, miners are effectively offshoring, or dumping their equipment as cheaply as possible.

But there are other factors at play while we wait.

Remember the Bitcoin tumble of 2018? You don’t. To jog your memory: China banned a vast portion of crypto trading back in 2018 too. Then they watched, and waited. We all forgot.

The market might crash, if only for a few days or weeks — but market crashes don’t actually reset markets. Crashes are acute, shorting events.

That isn’t to say acute events don’t hurt.

They do: it’s about who is participating in the market getting rekt, and how leveraged they are to withstand the dips over a protracted period of time. That might include you and your wallet.

Resets require chronic hits; you would need multiple collateral damage events all happening at the same time without recourse to reserve or inflation; or the time it takes to implement bad deflation/inflation. It’s an idea in practice not known to most monetary policy wonks or cryotocurrency kids these days — i.e. — a true global war, or mass liquidations on a scale not seen in at least 80 years.

Such acts that go beyond redomination can also (more often) be the result of a war, or deep state/political regime change.

This is the only way one event like Evergrande could crash the whole market: by sparking the collapse of global markets in quick succession, based on high market participation.

Making currency worthless

Some localised versions we have of fiat worthlessness in the world today are Iran, Venezeula, Uzbekistan, Zimbabwe; many others.

So it’s a shame then, that the cryptocurrency “punks” aren’t solving more of these real-world problems for people who need the most help from the community, but at least Venezeula and the fokks at Reserve/RSV are someway close to trying.

Create a cryptocurrency cold war with stagflation?

This localised situation (albeit, to China and with some US market participants mostly) all comes down to how many folks are involved in Evergrande, the provable reserves in them and Tether — and upcoming regulation findings in the US.

China recently banning cryptocurrency isn’t enough to hurt just yet, but they’re flexing and studying outcomes like any economist would. Once civilian money surveillance is 100% established, their CBDC will be most of the way de facto, and presumably Bitcoin can be treated like an actual asset again - once they let it recover.

This would be a smart tactic to control the price: stay out of the market now while other market participants (US, UK, Canada, Germany) suffer slow-burn inflation long enough to stagnate the cryptocurrency markets, long enough to drain any further shock movements by Jan 2022 — and then push up the value when they feel like they can reapprove or simply drip sell Bitcoin and Tether again globally.

It doesn’t even need approve crypto for public use again — in theory, the government could buy up mining resources currently being dumped, make them state-owned, legislate the exchanges and take funds for themselves.

I’m guessing of course, but it’s a hypothesis that so far, makes the most sense above anything I’ve seen or read from professional commentators who don’t even know what to think.

They’ve come to the same conclusions most traders and fans understood long, long ago: you have to fully ban crypto and force in CBDCs in order to try and stem the outflow of changing monetary power while also owning it.

Owning it how? Well, with the new soft power — which is digital colonialism and neo-colonial internet sovereignty.

The US does it via Facebook in a smart way, the UK is trying to copy Russia— you get it.

Meanwhile, China is way, way ahead using an imperial model to establish global power.

Like, if I was China, and I wanted to be even more super powerful, I might just force a grey-market crpytomining infrastructure expansion by ensuring neighbouring countries who were politically aligned, but not territorially owned got a piece of the pie… all without letting anyone know in the WTO or openly infringing on that country’s geopolitical autonomy, just like they did in 2018 for Laos.

Objectively speaking, that’s genius. And if they can get away with it, Central Asia will be next and all that any ambitious digital sovereign would need to do is give them cheap, renewable energy.

See, money is not merely wealth.

It’s only ever about creating power and the patterns of play are always the same.

In terms of establishing control now, in steps, over the future of money, China retains the upper hand globally, just as everyone else catches their breath. So they may as well test as much as they can, and run with it.

I’m more surprised Russia et al and even the typical Western powers aren’t clubbing together to do the same, but I genuinely think they haven’t a clue (and/or, they don’t seem interested enough in positive deflation right now, or in even trying to stop stagnation), because they’re racing to create their own CBDC domination.

Let’s see how December 2021 pans out.

This is not financial advice nor an advisory instrument. Always consult a professional and do your own research. Political opinions are presented impersonally and as narrative ideas only.