Crypto fuels stock market volatility: IMF

Bitcoin is moving more in line with stock prices than pre-pandemic, raising the risk that volatility in the $US2 trillion crypto assets sector transmits a shock to destabilise financial markets, the International Monetary Fund has warned.

According to the IMF’s estimates, bitcoin volatility explains about one-sixth of S&P 500 volatility during the pandemic, and about one-tenth of the variation in S&P 500 returns.However, a new IMF analysis says that since central banks slashed interest rates to near zero to support economies during the pandemic, there has been increased co-movement and spillovers between crypto and equity markets.

A sharp sell-off in crypto assets since November has caused the value of the digital assets to fall from almost $US3 trillion to about $US2 trillion, although their value is still about four times as high as 2017. in a bid to appeal to young customers and keep pace with rivals such as Square and PayPal, which already allow users to trade and spend bitcoin.

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IMF warns of turbulence when US interest rates rise; eurozone unemployment drops – business liveEmerging economies could suffer capital outflows and weaker currencies when Federal Reserve tightens US monetary policy But WILL interest rates rise. Don’t think governments can afford to stop printing money - they’ve painted themwleves into a corner now and there’s too much at stake, can’t afford to have huge numbers of mortgage defaults and crashing property prices.
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