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Fears of Chinese Property Meltdown Trigger Broad Selloff in Equities and Crypto Markets

Crypto markets were in the red on Monday morning NY time, and DeFi names were taking a beating as investors worldwide turned bearish overnight.

Pacesetter Aave was down 13.6% in the last 24 hours, and Maker’s MKR wasn’t far behind with a 10.7% drop, according to CoinGecko. Ethereum shed 8% in the last day, and Bitcoin dropped to $43,857. Even high-flying Solana was down by double-digits.

Unlike the fire and brimstone that fell on crypto in May, this selloff appeared to have originated in the equities markets. The S&P 500 Index was off 1.6% and the tech-heavy Nasdaq slid 2.1% Monday morning. Overseas markets were faring even worse. The Hang Seng in Hong Kong plunged 3.3% on Monday, and indexes in Germany, Britain and France were also sliding.

Contagion Looms

The likely cause? A wobbling real estate behemoth in China. Equities markets were shaken on news that China Evergrande Group, one of nation’s biggest property developers, was going sideways on more than $300 billion in loans at risk of default. When headlines hit that its banks were wary of restructuring the debt, investors turned bearish. After all, fears of a Chinese real estate bubble have been simmering in the world’s second biggest economy for years, and it didn’t take long for investors to hedge market risk as a possible new Asian contagion loomed in global markets.  

Willy Woo, market analyst and trader explained on Twitter that there’s a natural cycle when speculators are unsettled by macro news, but he also noted that “investors on-chain have been in strong accumulation.”  

“When the market is in fear, positions are sold off into USD in a flight to safety. Then positions are redeployed after the new environment is factored in,” he wrote. 

Tom Schmidt of Dragonfly Capital agreed, explaining how the current turmoil might be evidence of crypto having gone more mainstream.

“I think this generally gets understood as a sign of institutional adoption,” he told The Defiant, with larger funds shedding risk both in equities and in crypto.