The International Monetary Fund writes in a report that the Bitcoin crash of recent months has had no impact on global financial stability.
A dramatic price drop
In the report called “World Economic Outlook Update: Gloomy and More Uncertain” out yesterday published, the IMF acknowledged that the crypto market has experienced a “dramatic” price drop. However, the International Monetary Fund added that this has not harmed the financial system.
The Bitcoin price has lost nearly 70 percent of its value from its all-time high of $69,000, which was reached in November last year. Virtually every other cryptocurrency has experienced a similar price crash.
What causes the crypto crash?
Faced with uncertainty about the war in Ukraine and other macroeconomic factors, investors are selling risky assets. Bitcoin and other cryptocurrencies are considered risky, along with stocks.
“Crypto assets have undergone a dramatic price drop that has led to major losses in crypto firms and the failure of algorithmic stablecoins and crypto hedge funds. However, spillovers to the wider financial system have so far been limited.”
– IMF
The IMF thus referred to the collapse of blockchain Terra and its “algorithmic stablecoin”. Terra was popular among crypto traders until May, when its algorithmic stablecoin UST lost its peg to the dollar and billions of dollars of investment disappeared. Many investors lost a lot of capital and this collapse spread to other segments of the crypto market as a result.