In its most recent report, the International Monetary Fund (IMF) noted that Bitcoin and other cryptocurrencies pose systemic risks to global financial markets due to their high correlation with traditional assets.
Unprecedented monetary support from major central banks, seen as intended to cushion the blow from the pandemic, is seen as the main reason behind the increasingly stronger association between cryptocurrencies and the index. stock number.
The IMF notes that a sharp drop in the price of Bitcoin can have a spillover effect. The correlation between stocks and cryptocurrencies tends to increase during periods of high market volatility.
As reported by U.Today, Bitcoin fell below $40,000 for the first time since late September along with stocks.
As of recently, Bitcoin has been trading locked in the S&P 500 and Nasdaq. According to data provided by Kaiko, the correlation coefficient reached 0.61, the highest level since July 2020.
However, while the S&P 500 continues to trade near record highs, Bitcoin is down 38.39% from its lifetime peak.
The IMF concluded that Bitcoin has effectively failed as a portfolio diversifier because it continues to trade with equities.
To prevent economic hardship, the organization has once again emphasized the importance of creating a global crypto-regulatory framework.
In its October report, the prominent financial institution noted that the adoption of Bitcoin in El Salvador could lead to the instability of capital flows. It also sounded the alarm about stablecoins, claiming that they could be used as a tool to evade taxes.
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