IMF Sees Significant Increase in Correlations Between Bitcoin and Asian Equity Markets – Markets and Prices Bitcoin News

The International Monetary Fund (IMF), officials say the correlation between Asian equity markets’ performance and crypto assets, such as bitcoin or ethereum, has grown significantly.

IMF staff on Crypto and its Correlation with Asian Equities

The International Monetary Fund (IMF) published a blog post on Monday on cryptocurrency regulation and how crypto is now “more in step with Asia’s equities.”

Anne-Marie Gulde-Wolf, deputy director of IMF’s Asia and Pacific Department, Nada Choueiri, the mission chief for India, and Tara Iyer, an economist in the global financial stability analysis division of the IMF’s Monetary and Financial Markets Department, authored the post.

“While the returns and volatility correlations between bitcoin and Asian equity markets were low before the pandemic, these have increased significantly since 2020,” they wrote. “Crypto trading, however, soared as millions stayed home and received government aid, while low interest rates and easy financing conditions also played a role.”

The details are:

As Asian investors piled into crypto, the correlation between the performance of the region’s equity markets and crypto assets such as bitcoin and ethereum has increased.

The IMF officials noted that for example, “the return correlations of bitcoin and Indian stock markets have increased by 10-fold over the pandemic, suggesting limited risk diversification benefits of crypto.” In addition, “The volatility correlations have increased by 3-fold.”

The IMF officials further noted that “the rise in crypto-equity correlations in Asia has been accompanied by a sharp rise in crypto-equity volatility spillovers in some Asian countries,” elaborating:

This shows a greater interconnectedness of the asset classes, which allows for the transmission shocks that could impact financial markets.

The IMF officials also asserted that “Regulatory frameworks for crypto in Asia should be tailored to the main uses of such assets within the countries.”

The authors added, “They should establish clear guidelines on regulated financial institutions and seek to inform and protect retail investors,” elaborating:

To be truly effective in crypto regulation, it is important to coordinate across jurisdictions.

Comment on IMF officials’ comments? Comment below.

Kevin Helms

Kevin is a graduate of Austrian Economics. He discovered Bitcoin in 2011, and has been an advocate ever since. He is interested in Bitcoin security and open-source software, network effects, and the intersection of cryptography and economics.

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