Why The IMF Thinks The Crypto Market Could See “Further Selloffs”

Crypto market trading is in the green, with Bitcoin and Ethereum surpassing critical resistance levels. The first and second cryptocurrencies by market capitalization record a 10% and 15% profit in the last day and seem poised for more profits during today’s trading session.

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Bitcoin must have a daily candle that closes above $23,000 in order to see the direction clearly. Ethereum should be above $1,700. Data from Material Indicators records a thing order book on the sell side if BTC’s price can push above its current levels with high probabilities of hitting $28,000 in the short term.

Longer time frames will see macroeconomic conditions remain an obstacle for any long-term rally. Tobian Adrian, the Director of Monetary and Capital Market, for the International Monetary Fund, (IMF), predicted that there would be more losses with the new asset class.

Adrian discussed the potential risk to the cryptocurrency market as well as risk-on investments like stocks in a Yahoo Finance interview. Adrian thinks that the fall of stablecoins could cause another downturn in digital assets. According to the IMF official:

There could be further failures of some of the coin offerings — in particular, some of the algorithmic stablecoins that have been hit most hard, and there are others that could fail.

An official from the IMF referred specifically to the fall of Terra (LUNA), the ecosystem. Three Arrows Capital, Celsius and other crypto companies were affected. This contributed to the decline in Bitcoin’s price and other cryptocurrency.

Adrian claims digital assets might face another similar event but doesn’t mention a specific project with the size of Terra that could trigger it. Because of the collateral’s vulnerabilities, the official at the IMF believes that stablecoins may increase selling pressure within the emerging industry.

There’s some vulnerability there, because they’re not backed one to one. [Some fiat-backed stablecoins] are backed by somewhat risky assets…it is certainly a vulnerability that some of the stablecoins are not fully backed by cash-like assets.

BTC’s price with important gains on the 4-hour chart. Source: BTCUSDT tradingview

Are There Any Recessions Like 2008 That Could Cause The Crypto Market to Collapse?

The IMF official also spoke out about the possible risk of an economic recession. Economic recession technically should not be confused with the U.S. reporting its second consecutive quarter of negative growth.

Adrian said that it was unlikely the world would experience something similar to 2008, but he did not rule out the possibility. At that time the financial sector was exposed to “shadow banking”, to assets hidden from the banks’ balance sheets which collapse worsening the economic crisis.

The international regulators may be more hostile to cryptocurrencies. Officials from the IMF claimed these organizations should enforce securities laws in the sector of 40,000. He also said:

Regulating the coins themselves is going to be difficult but regulating the entry points such as exchanges and wallet providers to invest in those coins, that’s something that is very concrete and very feasible.

This approach seems to have been adopted by the U.S. Securities and Exchange Commission. The Commission is currently battling major industry players like Ripple, a payment solution company, and Coinbase, a crypto exchange.

Gary Gensler, Chairman of the SEC, has already indicated that he would be willing to admit that Bitcoin is outside their control. The Commission could be more aggressive and the crypto market may suffer, as projects try to comply with regulations.

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This, along with macroeconomic conditions, will be the greatest obstacle for the emerging asset class. Although the official at IMF might have a point in this regard, cryptocurrencies have faced regulatory challenges since their inception.

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