Kevin Helms
A student of Austrian economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open source systems, network effects and the intersection of economics and cryptography.
IMF Sees Significant Increase in Correlations Between Bitcoin and Asian Stock Markets – Markets and Prices Bitcoin News
Officials at the International Monetary Fund (IMF) say the correlation between the performance of Asian stock markets and crypto-assets such as bitcoin and ethereum has increased significantly.
IMF staff on crypto and correlation to Asian stocks
The International Monetary Fund (IMF) published a blog post on Monday about cryptocurrency regulation and how crypto is now “more in step with Asia’s stocks”.
Anne-Marie Gulde-Wolf, Deputy Director of the IMF’s Asia and Pacific Department, Nada Choueiri, the Chief of Mission for India, and Tara Iyer, an economist in the Global Financial Stability Analysis Unit of the IMF’s Monetary and Financial Markets Department, wrote the post.
“While the returns and volatility correlations between bitcoin and Asian stock markets were low before the pandemic, these have increased significantly since 2020,” they wrote. “However, crypto trading increased as millions stayed at home and received government support, while low interest rates and easy financing conditions also played a role.”
They detailed:
As Asian investors piled into crypto, the correlation between the performance of the region’s stock markets and crypto assets such as bitcoin and ethereum has increased.
IMF officials noted that, for example, “the return correlations of bitcoin and Indian stock markets have increased by 10 times over the pandemic, suggesting limited risk-spreading benefits of crypto.” Additionally, “Volatility correlations have increased by 3 times.”
IMF officials further noted that “the increase in crypto-equity correlations in Asia has been accompanied by a sharp increase in crypto-equity volatility effects in some Asian countries,” elaborating:
This indicates an increasing correlation between the two asset classes that allows the transmission of shocks that can affect financial markets.
IMF officials also argued that “The regulatory framework for crypto in Asia should be tailored to the main use of such assets in the countries.”
The authors added, “They should establish clear guidelines for regulated financial institutions and seek to inform and protect retail investors,” elaborating:
Finally, to be fully effective, crypto regulation should be closely coordinated across jurisdictions.
What do you think of the comments made by the IMF officials? Let us know in the comments section below.
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