New data has shown a 10 fold increase in the correlation between Bitcoin and stocks in certain regions. There was a clear division between crypto and the financial markets before the COVID-19 pandemic.
The International Monetary Fund (IMF), believes that this line has become thinner and that additional regulatory measures are needed to address the situation.
A group of IMF economists expressed concern over the dynamic of Asian markets. The integration of crypto into the financial system seems to be increasing rapidly in a blog posting from Sunday. The economists added that this poses some risks to financial stability.
“While the financial industry appears to have been protected from these sharp movements it could be susceptible to future boom-bust cycles. Individual or institutional investors may be at risk of contagion if they have both traditional and crypto assets.
Economists also mentioned the Indian market as an example, where the return correlations between Bitcoin ( Bitcoin)and Indian stock markets has increased 10-fold since the pandemic.
It is believed that crypto-related platforms and investment instruments in the stock market are increasingly accepted by investors.
The experts used the spillover method to find a sharp increase in volatility in crypto-equity in Thailand, Vietnam, and India. Asian regulators should “establish clear guidelines for regulated financial institutions,” inform, protect, and coordinate across jurisdictions.
Tobias Adrian (IMF director of capital market), stated on July 27 that algorithmic stablecoins could fail again. To better protect investors , stablecoins require a “global regulatory strategy.