IMF: Correlation growing between crypto and equity markets in Asia

IMF: Correlation growing between crypto and equity markets in Asia
Prior to the COVID-19 outbreak in Asia, there was a significant divide between cryptocurrency and financial markets in general. The International Monetary Fund (IMF) feels that the border has widened and that new regulatory measures are required.

In an Aug. 21 blog post, a group of IMF economists expressed their concerns about the dynamics of Asian markets, where the integration of cryptocurrency into the larger financial system appears to be accelerating. The economists argued that this poses some dangers to financial stability, adding:

“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 experts also cited the Indian market, where the return correlations of Bitcoin (BTC) and Indian stock markets have surged 10-fold since the pandemic began.

The reasons for the narrowing link between crypto and traditional finance are thought to be increased stock market approval of crypto-related platforms and investment vehicles, as well as growing crypto use by individual and institutional investors in Asia.

The experts discovered a strong increase in crypto-equity volatility spillovers in India, Vietnam, and Thailand using the spillover technique outlined in their Global Financial Stability Note. Finally, Asian regulators are advised to "create clear norms on regulated financial institutions," educate and safeguard retail investors, and closely coordinate their activities across jurisdictions.

On July 27, the IMF director of capital markets, Tobias Adrian, stated that there could be further failures of algorithmic stablecoins. Thus, stablecoins need a “global regulatory approach” to better protect investors.
Chima Ugo is a patriotic Nigerian, a journalist, blogger and singer who is so much interested in the internet, journalism, and blogging and have been for half a decade.