IMF Reports Increasing Correlation Between Asian Equities Markets And Crypto

IMF – There was a clear separation between the cryptocurrency and financial markets in general prior to the COVID-19 pandemic in Asia. The International Monetary Fund thinks that because the border has become thinner, further regulatory measures are now necessary.

IMF economists expressed their worries about the dynamics of Asian markets in a blog post dated August 21, where it appears that the integration of cryptocurrencies into the larger financial system is expanding quickly. The analysts noted that this presents some dangers to financial stability and added:

“While the financial sector appears to have been insulated from these sharp movements, it may not be in future boom-bust cycles. Contagion could spread through individual or institutional investors that may hold both crypto and traditional financial assets or liabilities.”

The economists also used the Indian market as an illustration – IMF

Indian, where the return correlations between Bitcoin (BTC) and the local stock market have multiplied tenfold since the pandemic.

The growing acceptance of platforms and investment vehicles related to cryptocurrencies in the stock market, as well as the increasing adoption of cryptocurrencies by retail and institutional investors in Asia, are thought to be the driving forces behind the tightening relationship between cryptocurrencies and traditional finance.

The experts discovered a high increase in spillovers of crypto-equity volatility in India, Vietnam, and Thailand using the approach for determining spillovers they devised for their Global Financial Stability Note. Finally, it is advised that Asian regulators “create clear criteria on regulated financial institutions,” educate and safeguard retail investors, and closely coordinate their initiatives across jurisdictions.

Tobias Adrian, the IMF’s director of capital markets, warned that algorithmic stablecoins might continue to fail on July 27. To properly safeguard investors, stablecoins require a “global regulatory strategy”.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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