Crypto is more in step with Asia’s equities, IMF says
08/22 09:14
According to IMF blog, few parts of the world have embraced crypto assets like Asia, where top adopters include individual and institutional investors from India to Vietnam and Thailand. This raises the important issue of the extent of integration of crypto into the financial system in Asia.
Crypto trading, however, soared as millions stayed home in the pandemic and received government aid, while low interest rates and easy financing conditions also played a role. The total market value of the world’s crypto assets surged 20-fold in just a year and a half to $3 trillion in December.
As Asian investors piled into crypto, the correlation between the performance of the region’s equity markets and crypto assets such as Bitcoin and Ethereum has increased.
For example, the return correlations of Bitcoin and Indian stock markets have increased by 10-fold over the pandemic, suggesting limited risk diversification benefits of crypto. The volatility correlations have increased by 3-fold suggesting possible spillovers of risk sentiment among the crypto and equity markets.
Key drivers of the increased interconnectedness of crypto and equity markets in Asia could include growing acceptance of crypto-related platforms and investment vehicles in the stock market and at the over-the-counter market, or more generally growing crypto adoption by retail and institutional investors in Asia, many of whom have positions in both the equity and crypto markets.
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