The IMF revealed on Tuesday his research, reiterating last month’s calls for global regulatory action. In the absence of measures, the massive fluctuations in the two asset classes could exaggerate financial instability, he warned.
“The correlation of crypto assets with traditional options, such as equities, has increased significantly, limiting their perceived benefits in terms of risk diversification and increasing the risk of contagion in financial markets.”, wrote Tobias Adrian and Mahvash Qureshi, two senior officials in the capital market departments of the International Mount Fund. Tara Iyer, an economist specializing in global financial stability, also contributed to the research. Politico.
The research is a blow to crypto proponents, who have described Bitcoin-like currencies as an alternative that protects you from market volatility.
Cryptocurrencies could have served this purpose before the pandemic struck. But Bitcoin has “moved faster with stock indices,” such as the S&P 500, since central banks launched massive asset-buying programs to protect their economies against the pandemic, the IMF said.
The trend is “obvious even in emerging economies”, where the takeover of cryptocurrencies has been much stronger, the analysis states.
This closer link between the two assets offers even more reasons to develop a global framework for regulating and supervising cryptocurrencies to prevent financial instability, the analysis said.
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