“Crypto Sales Won’t Affect Financial Markets” – Here’s Why

In a report published on July 26, the International Monetary Pleasured claimed that Bitcoin [BTC] bear market does not affect the stability of the global financial system.

The IMF report “World Economic Outlook Update: Gloomy and More Uncertain” also noted that the cryptocurrency market had a “spectacular” sale. However, the much talked about sale did not harm the financial system.

This relative calm exists despite recent failures, such as those of the Three Arrows Capital fund and the stablecoin TerraUSD. However, the aforementioned failure has prompted some regulators to want to take more control over the developing market.

At press time, Bitcoin was trading at $21,285.80. The largest cryptocurrency, by market cap, was at an all-time low of 70%. However, the state of almost all other cryptocurrencies was also in decline. Well, the 2022 selloff affected all tokens equally.

Bitcoin and digital currencies are considered risky

Investors are turning away from “risky” assets due to uncertainty caused by the Russian invasion of Ukraine and supply chain issues. In this context, the IMF said,

“Crypto assets have seen a dramatic sell-off that has led to large losses in crypto investment vehicles and caused the failure of algorithmic stablecoins and crypto hedge funds, but the fallout to the broader financial system has been limited. so far”,

The body’s remark about an “algorithmic stablecoin” alluded to the collapse of Terra’s blockchain. Terra had a good reputation among cryptocurrency speculators before May. However, when the UST stablecoin lost its dollar peg, billions of dollars of investment disappeared. This led to a feeling of mistrust in the market.

The need for regulation

Considering the events of the year 2o22, institutions after institutions came out against stablecoins. In fact, some organizations have said they need stricter regulation.

International standard setters are also trying to define precisely how banks should start investing in cryptocurrency markets.

A cap on Bitcoin holdings has been suggested by the Basel Banking Control Committeeas well as a significant capital requirement that would limit the ability of banks to make loans based on cryptocurrency reserves.