International Monetary Fund (IMF) data show a 10-fold increase in the return correlation between the cryptocurrency sector and stocks in Asia.
Before the COVID-19 pandemic in Asia, there was a strong split between the crypto and financial markets in general. The IMF believes that this limit is now thinning even further and still requires additional regulatory measures.
IMF Economists: Accelerating Crypto Industry Financial Risk
In the article released by IMF economists, he shared his concerns about the dynamics of Asian markets, where the integration of crypto into the larger financial system is growing rapidly. Noting that this poses certain risks to financial stability, economists said:
“While the financial sector appears to be insulated from these sharp movements, this may not be the case in future bullish and bearish cycles. Contagion can spread through individual or institutional investors holding both crypto and traditional financial assets or liabilities.”
Economists also mentioned the example of the Indian market, where the return correlations of Bitcoin (BTC) and Indian stock markets increased 10 times compared to the pandemic.
The reasons behind the tightening link between crypto and traditional finance are believed to be the growing acceptance of crypto-related platforms and investment tools in the exchange, as well as increased crypto adoption by retail and institutional investors in Asia.
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