We all know that bitcoin price is being pumped by the biggest bubble ever-the US dollar.
There's an element of truth to this, but I'd like to emphasize that US debt accounts for a less than people think. Easy credit obviously provides an easy way into the cryptocurrency markets, and American libertarians like to point to the US economy first. But the elephant in the room is actually China, especially when you consider their historical position in the mining sector and exchange markets.
People with a limited understanding of the situation say that the Chinese economy is a net exporter, and thus that the situation is sustainable. On the contrary,
the rise in national output was built on a massive mountain of credit.
Total borrowing climbed to about 260 percent of the economy’s size by the end of 2016, up from 162 percent in 2008, and will hit close to 320 percent by 2021 according to Bloomberg Intelligence estimates. Economy-wide debt levels are on track to rank among "the highest in the world," according to Tom Orlik, BI’s Chief Asia Economist.
That path may be what prompted outgoing People’s Bank of China Governor Zhou Xiaochuan to warn of the risk of a plunge in asset values following a debt binge, or a "Minsky Moment," earlier this month.
There are multiple global credit bubbles waiting to pop. But like 2008, I don't think a systemic collapse is on the cards.