Why The IMF Thinks The Crypto Market Could See “Further Selloffs”
July 28 2022 - 1:14PM
NEWSBTC
The crypto market is trading in the green with Bitcoin and Ethereum
pushing beyond 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. Related Reading | Bitcoin Makes
Surprise Climb As Fed Discloses 0.75 Point Rate Bump In order to
get more clarity in terms of direction, Bitcoin must close the
daily candle above $23,000 and Ethereum 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. If this rally
can push past $25k, then $28k comes into focus very quickly. If you
are long, don’t forget to take profits along the way. When the bear
wakes up from hibernation he’s going to be hangry.
pic.twitter.com/YGe4Swu3wT — Material Indicators (@MI_Algos) July
28, 2022 In longer timeframes, macro-economic conditions will
remain an obstacle to any sustainable rally. In that sense, Tobian
Adrian, Director of Monetary and Capital Market for the
International Monetary Fund (IMF) predicted more losses in the
nascent asset class. In an interview with Yahoo Finance, Adrian
spoke of the risk for the crypto market and risk-on assets, like
stocks. For digital assets, Adrian believes that the collapse of a
stablecoin could fuel another leg down. The IMF official said:
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. The IMF official
referred to the collapse of the Terra (LUNA) ecosystem. This event
led to the downfall of Three Arrows Capital, Celsius, and other
companies in the crypto industry. Thus, contributing to the crash
in the price of Bitcoin and other cryptocurrencies. 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.
The IMF official believes stablecoins might add to the selling
pressure in the nascent industry due to the alleged vulnerabilities
in its collateral: 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. Will The Crypto Market Collapse If There Is A 2008 Like
Recession? In addition to the alleged risk from stablecoins, the
IMF official spoke about the potential risk of economic recession.
The U.S. recently reported its second consecutive quarter with a
negative GDP, which should technically spell economic recession.
However, Adrian ruled out that the global market would see
something like in 2008. 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.
Cryptocurrencies could face a bigger obstacle from international
regulators. The IMF official claimed that these entities should
enforce securities laws to the 40,000 he claims comprised the
sector. He added: 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. The U.S. Securities and Exchange
Commission (SEC) seems to be following this approach. The
Commission has entered into legal battles with major players in the
sector, including payment solutions company Ripple and crypto
exchange Coinbase. SEC Chairman Gary Gensler already stated that he
is willing to acknowledge that only Bitcoin is out of their
jurisdiction. If the Commission turns more aggressive, the crypto
market could suffer as crypto projects scramble to meet regulations
requirements. Related Reading | Bitcoin Bounces Off
Consolidation Range, What Lies In Store? This is probably one of
the biggest obstacles for the nascent asset class in the coming
months along with macro-economic conditions. In that sense, the IMF
official might be on point, but cryptocurrencies have been facing
regulatory hostilities since their inception.
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