• Thu. Apr 18th, 2024

According to new data, there has been an increase of 10-fold in the correlations between stock and BTC in certain regions. Before the COVID-19 lockdown in Asia, the distinction between the financial and crypto markets was clear. 

IMF Economists Reveals Strong Correlation Between Crypto And Equity In Asia

According to the IMF (International Monetary Fund), the border between both markets is getting thinner. As a result, the situation needs more regulatory measures to prevent more correlation.

On August 21st, a group of economists at the IMF showed concerns over the situation of the Asian markets. The blog post revealed that the correlation between crypto and the general financial system is increasing swiftly. 

According to economists, this poses huge risks to the financial stability in the region. Although it seems the financial sector is petted from the sharp increases, the situation may change in the future.

Additionally, they noted that this situation could spread via institutional or individual investors that hold traditional and crypto liabilities or assets.

Furthermore, the economists use the Indian market as an example. In the Indian market, the return correlation Between the country’s stock market and BTC has hiked by 10-fold during the pandemic.

However, it is unclear why the correlation is increasing in these regions. However, the experts believe the widespread acceptance of cryptocurrency platforms and other stock market investment vehicles could be responsible. 

Also, there is growing crypto adoption by institutional and retail investors in the continent. Most individuals are turning to crypto for payment purposes.

Economists Call For More Regulation 

The experts developed a spillover methodology. Using this methodology m, they uncovered a sharp increase in crypto-equity volatility in Thailand, India, and Vietnam. 

While concluding their report, the experts advised regulators in Asia to formulate clear guidelines for regulated financial firms. Also, they should inform retail investors about the risks of crypto investment. 

In addition, the report hammered the need for coordinated efforts toward regulation across various countries. The aim is to protect investors and the larger financial market.

On July 27th, Tobias Adrian, the director of the IMF’s capital market, noted that more stablecoins could depeg and crash. This was after the fall of TerraUSD, which sent Ripple effects across the crypto sector.

As a result, the director stressed the importance of an international regulatory approach to stablecoins. The aim is to protect investors after several individuals and companies lost millions following Terra’s crash.

In August, two stablecoins lost their anchor to the USD. This includes Huobi’s stablecoin, which lost its peg briefly and has regained stability. The other stablecoin is the AUSD, owned by Acala Network.

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