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The Director of Capital and Money Markets of the International Monetary Fund (IMF) has issued a warning about selling pressure in the cryptocurrency market for the time being.
The crypto market today (July 29) is trading in the green with the prices of Bitcoin and Ethereum both breaking through key resistance levels. The two cryptocurrencies topping the total market cap recorded significant gains of 10% and 15% in the past day and appear to be showing signs of a profit taking by investors.
In the longer term, macroeconomic conditions will remain an obstacle to any sustained rally. In that view, Tobian Adrian, Director of Money and Capital Markets of the International Monetary Fund (IMF) warned of further selling pressure in the crypto market and the risk to investors in the current situation. present.
“We could see further sell-offs, both in crypto assets and in risky asset markets like equities. The market could see further setbacks for some financial services. major – in particular, some algorithmic stablecoins are hit the hardest, and there are others that could fail as well.”
The IMF director believes that a further decline in cryptocurrencies will be inevitable in the context of a recession like the current one. Especially there are more collapsing examples like Terra with LUNA token and UST stablecoin, Three Arrows Capital fund or Celsius crypto finance company.
Adrian also warned of the risk of stablecoins pegged to fiat currencies without sufficient financial guarantees, something that both Treasury Secretary Janet Yellen and the Federal Reserve have warned about. Regarding Tether (USDT) specifically, the IMF executive emphasized: “There are some holes there because they are not backed one to one.” He noted that some stablecoins “are backed by assets that are somewhat risky, and there is certainly a loophole as they are not backed and backed by cash-like stable assets.”
However, Adrian argues that the current threat cannot be compared with the 2008 financial crisis:
What was very disturbing during the 2008 crisis was that banks were heavily exposed to shadow banks and we did not see this exposure of banks to shadow banks through crypto at the time. this.
Furthermore, the IMF director noted that regulations are needed to protect investors and the financial system given the large number of cryptocurrencies in existence. He thinks that regulating the coins themselves will be difficult, but regulating entry points like exchanges and wallet providers to invest in those coins is very specific and possible.
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