IMF Says Correlation Between Equity Markets And Crypto Is Growing In Asia

In advance of the COVID-19 pandemic across Asia financial and crypto markets witnessed a resilient division between them in general. At present, the respective demarcation has become smaller and there is a requirement for extra regulatory actions, as stated by the International Monetary Fund (IMF).

IMF Economists Caution about Mounting Crypto-Equity Correlation across Asia

On 21st August, a blog post was shared by the economists of the IMF, mentioning their apprehensions regarding the subtleties of the Asian markets. They consider that cryptocurrency’s integration in the broader financial system seems to have substantial growth. They are of the view that the respective scenario poses hazards to financial stability. They added that while presenting the financial sector seems to have some protection from such severe movements, the boom-bust cycles of the future may not be as such.

They also mentioned that the organizational or individual investors possessing both conventional financial assets and crypto would go through the contagion. The economists disclosed an instance of the market in India, where the India-based stock and Bitcoin (BTC) markets’ return correlations have grown by ten times during the pandemic.

One possible cause at the back of the enhancing linkage between conventional finance as well as the crypto market includes the escalating acceptance of crypto-related investment vehicles and venues within the stock market. The other one is the increasing crypto adoption on the behalf of the organizational and retail investors living within Asia.

With the utilization of the spillover methodology that is created in the Global Financial Stability Note, it was additionally discovered by the experts that a considerable elevation has been witnessed in the volatility spillovers in the case of crypto and equities within India, Thailand, and Vietnam. While concluding, the experts turned toward the regulatory authorities operating within the Asian region.

They advised them to construct some clear and elucidated instructions dealing with the regulated financial organizations. They moved on to suggest to the regulators that they should provide information to and shield the retail investors along with keenly organizing their endeavors throughout the jurisdictions.

Tobias Adrian of IMF Recommends a Global Regulatory Agenda for Crypto Investors’ Protection

On 27th July, Tobias Adrian (the capital markets director at IMF) noted revealed that there is a possibility of more failures to be witnessed in the case of the algorithmic stablecoins. His suggestion in this respect was the adoption of a worldwide regulatory approach to shield the investors in a better way.

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