Correlation Between Performance of Equity Markets and Crypto Assets in Asia Increased: the IMF

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The correlation between the performance of Asia's equity markets and crypto assets has increased as investors from that region piled into crypto in recent years, according to a blog from the International Monetary Fund (IMF).

The IMF said that the returns and volatility correlations between Bitcoin and Asian equity markets have increased significantly since 2020, before the pandemic.

Currently, in Asia, the return correlations of Bitcoin and Indian stock markets have increased by 10-fold over the pandemic. This signifies limited risk diversification benefits of crypto, according to the IMF.

Risk sentiment among the crypto and equity markets could see a possible rise as the volatility correlations have increased by 3-fold.

«Crypto trading, however, soared as millions stayed home and received government aid, while low-interest rates and easy financing conditions also played a role,» the IMF said.

According to the IMF, the inclusion of the growing acceptance of crypto-related platforms and investment vehicles in the stock market and the over-the-counter market could be the possible factors that have led to an increased interconnectedness of crypto and equity markets in Asia.

The IMF stated that their research showed that the rise in crypto-equity correlations in Asia also led to a sharp increase in crypto-equity volatility spillovers in India, Vietnam and Thailand.

Following the spread of crypto globally, authorities in Asia have turned increasingly sensitive and alert to the growing risks posed by this phenomenon.

To do so, authorities have increased focus on crypto regulation, and the building regulatory framework is under construction, including in those countries mentioned above.

«A significant effort is also needed to