Earlier, BTC took a hit amid risk aversion when news broke that China Evergrande Group had failed to make interest payments at two banks. Then there were rumors that a deal could be announced within days. Evergrande would reportedly be broken down into three standalone companies. Such a deal would allow the Chinese government to take control of the company, with state-owned enterprises at the heart of the restructuring. Traders loved the rumors, piling back into equities and risk-sensitive assets.
The dollar came under pressure during today’s Asian session. The Chairman of Evergrande said that the company will do everything to settle up with investors and customers. The company's shares monetarily spiked by 38% to HK$3. By the close, the name rose 18.6% to 2.55. All markets experienced a relief rally.
At the end of its two-day meeting, the Fed left the federal funds rate on hold in the range of 0%-0.25%. Monthly bond purchases remained at $80 bln per month, while tapering is expected to start in November. Fed officials believe that the first rate hike will take place in 2022. The DXY index rose, but today it has lost almost everything as the market apparently stuck to the adage: “Buy the rumor, sell the fact” as investors priced in the Fed’s updated dot plot.
Uncertainty still prevails on trading floors due to Evergrande default fears. Earlier there were reports that Chinese regulators were advising the developer to avoid short-term default on dollar bonds. The company was told to focus on completing construction in progress and settle accounts with individual investors.
Reuters has been running the opposite message: Chinese authorities are asking local authorities to prepare for the potential default of Chinese real estate giant Evergrande Group.
Bitcoin has pared 50% of its losses from the drop to $39,600 from $48,843. It could be a long uphill recovery. Unless the external news flow deteriorates due to Evergrande, amid a weakening dollar, the road will open for buyers to reach $47,245. If this level is not reached, we will likely see another pullback. In light of the current price model, we can see the risk of a retracement to $42k. By the time of writing, price action was rising on thin volumes.