The International Monetary Fund now admits that Bitcoin (BTC) and digital currencies are now key components of financial markets. However, the international financial institution also states that there are key risks posed to the economy as a result.
The IMF’s assertion comes after a sustained period where it downplayed the effects of the crypto asset class. Now that crypto has risen to integrally revolutionize the mainstream financial sector, the IMF believes these markets are now at risk.
In a blog post from January 11th, the IMF said:
“Our analysis suggests that crypto assets are no longer on the fringe of the financial system. Given their relatively high volatility and valuations, their increased co-movement could soon pose risks to financial stability especially in countries with widespread crypto adoption.”
First launched in 2009, the crypto asset class now sits at $1 trillion in just under 13 years. Much of this success is due to the exponential burst in popularity that crypto has enjoyed within a relatively short time. According to the IMF, it is this same popularity that now sees other facets of the financial markets inextricably tied to crypto. The IMF says that assets like BTC and ETH showed little correlation with the stock markets – especially before the pandemic. However, after the 2020 central bank crisis, there has been a “contagion across financial markets” as crypto and stocks now seem to move in sync.
Image Credits: Pixabay
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