IMF believe that the growing influence of the cryptocurrency market requires the creation of adequate regulation of this sphere.
International Monetary Fund foundThe International Monetary Fund says that trading volumes in the cryptocurrency market, and the dynamics of that market itself, especially when it comes to bitcoin and Ethereum, correlate with what happens in the Asia-Pacific equity market, and there is a two-way interaction. In particular, there is a correlation between the cryptocurrency market and the stock markets in India, Vietnam and Thailand.
The IMF attributes this to the fact that this region has seen the world’s highest interest in investing in digital assets, and these assets are taking a growing and increasingly prominent share of the investment portfolios of both individuals and institutional investors in these countries.
As a result, investors often spend rebalancing of their portfolios, increasing the share of classic assets and decreasing investments in cryptocurrencies, or doing the opposite. All of this leads to increased volatility in the classic Asia-Pacific stock market at times.
The organization believes that the digitalization of the global financial system, which is taking place through digital assets, has strengths in the form of creating more efficient payment systems, as well as increasing financial inclusion for more people in the world, on the other hand there are also financial risks. That is why, as noted by IMF experts, the cryptocurrency market needs adequate regulation.
It is noted that during the COVID-19 pandemic, investments in digital assets got a boost in the world, and the capitalization of the market for such assets increased 20-fold in a year and a half, up to $3 trillion in December 2021.
However, as most central banks around the world began to tighten monetary policy, raising rates in response to rising inflation, the cryptocurrency market faced a decline in liquidity inflows, causing its total capitalization to drop beyond the $1 trillion level in the first half of 2022.