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Officials at the International Monetary Fund (IMF) say that the correlation between the performance of the Asian equity markets and crypto assets such as bitcoin and ethereum has increased significantly.<\/strong><\/p>\n The International Monetary Fund (IMF) published a blog post on Monday on cryptocurrency regulation and how crypto is now \u201cmore in step with Asia\u2019s equities.\u201d<\/p>\n Anne-Marie Gulde-Wolf, deputy director of IMF\u2019s 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\u2019s Monetary and Financial Markets Department, authored the post.<\/p>\n \u201cWhile the returns and volatility correlations between bitcoin and Asian equity markets were low before the pandemic, these have increased significantly since 2020,\u201d they wrote. \u201cCrypto trading, however, soared as millions stayed home and received government aid, while low interest rates and easy financing conditions also played a role.\u201d<\/p>\n They detailed:<\/p>\n As Asian investors piled into crypto, the correlation between the performance of the region\u2019s equity markets and crypto assets such as bitcoin and ethereum has increased.<\/p>\n<\/blockquote>\n The IMF officials noted that for example, \u201cthe return correlations of bitcoin and Indian stock markets have increased by 10-fold over the pandemic, suggesting limited risk diversification benefits of crypto.\u201d In addition, \u201cThe volatility correlations have increased by 3-fold.\u201d<\/p>\n The IMF officials further noted that \u201cthe rise in crypto-equity correlations in Asia has been accompanied by a sharp rise in crypto-equity volatility spillovers in some Asian countries,\u201d elaborating:<\/p>\n This indicates a growing interconnectedness between the two asset classes that permits the transmission of shocks that can impact financial markets.<\/p>\n<\/blockquote>\n The IMF officials also asserted that \u201cRegulatory frameworks for crypto in Asia should be tailored to the main uses of such assets within the countries.\u201d<\/p>\n The authors added, \u201cThey should establish clear guidelines on regulated financial institutions and seek to inform and protect retail investors,\u201d elaborating:<\/p>\n Finally, to be fully effective, crypto regulation should be closely coordinated across jurisdictions.<\/p>\n<\/blockquote>\nIMF Staff on Crypto and Correlation to Asian Equities<\/h2>\n
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