The IMF is concerned about crypto usage.
A few months ago, the latter was an algorithmically stable currency that lost its peg. This culminated not just in the collapse of the coin and its sister asset Luna, but also the sudden loss of billions of dollars by investors. In a subsequent interview, the IMF stated that this is unlikely to be the only instance in which something similar occurs, and it cautioned that more coins may fail in the future.
The bitcoin price has been one of the most negative in history. The price of bitcoin, for example, has decreased by about 70 percent since November of last year, when it reached a new all-time high of approximately $68,000 per unit. Currently, the asset is battling to maintain a position in the low $20,000 range, and analysts are divided as to whether the currency has reached its bottom.
In addition, the valuation of the cryptocurrency market has fallen by more than $2 trillion. The IMF has taken note of all the frightening commotion in the region and released the following statement:
Both crypto assets and riskier asset markets, such as equities, might experience more selloffs. There could be additional failures of some coin offerings, particularly some of the algorithmically stable currencies which have been hit the hardest, and others could also fail.
To be fair, the IMF has never really given crypto a fair chance, given the space’s instability and price fluctuations. Not too long ago, the group reached out to the Central American nation of El Salvador and pleaded with it to renounce all affection and regard for bitcoin, arguing that the resource was insufficiently stable to be properly addressed as legal cash. El Salvador swiftly rejected this request and continues to accept Bitcoin as legal tender despite continuous price fluctuations.
Will additional coins fall?
The department extended its statement with the following language on Tether units, which it believes are now sensitive in many of the same ways as Terra USD:
There is a security risk because they are not backed one to one… [Some fiat-backed stable coins] are backed by assets that are relatively risky… It is unquestionably a weakness that some stable coins are not completely anchored by cash-like assets… During the 2008 financial crisis, the large exposure of banks to shadow banks was quite concerning; however, we do not observe this exposure of banks to shadow banks through cryptocurrency.
The current bad market has finally boosted the demand for crypto regulation, which is a bit of a double-edged sword (excuse the pun), since it might make the space more legitimate, but crypto was based on the principles of financial independence.
Tags: IMF, Luna, Terra USD