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IMF raises concern over rise in correlation between equity and crypto market

The decentralised concept of cryptocurrencies and the potential for substantial gains make them a favourite among speculators and investors, especially in times of economic uncertainty or political turbulence. There was a large difference between the crypto and financial markets before the COVID-19 epidemic in Asia. The International Monetary Fund (IMF) believes that the gap between these two markets is narrowing and requires further regulatory measures.

A group of economists from the International Monetary Fund (IMF) raised concerns about the dynamics of Asian markets in a blog post that was published on August 21. They used the Indian market as an example, citing that the return correlations between Bitcoin (BTC) and the Indian stock markets had surged by a factor of ten times since the epidemic began.

It is believed that the growing acceptance of crypto-related platforms and financial products in the stock market, as well as the growing adoption of crypto by retail and institutional investors in Asia, are the reasons behind the tightening relationship between cryptocurrency and traditional finance.

The experts identified a significant increase in crypto-equity volatility spillovers in India, Vietnam, and Thailand when they used the technique for calculating spillovers that they had devised for their Global Financial Stability Note. In conclusion, it has been proposed that Asian regulators “create clear norms on regulated financial institutions,” educate and safeguard regular investors, and closely coordinate their actions across different countries.

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Reporter
Jeewan Singh is CryptoShrypto’s content writer and a seasoned writer with over two years of experience in writing about Indian Securities Market. Jeewan's participation in Blockchain and Cryptocurrency started in late 2020, and he hasn't looked back since. The technical and economic outcomes of cryptocurrency are what spark his curiosity, and he keeps one eye on the market.
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