The crypto market is trading in the green with Bitcoin and Ethereum breaking through critical resistance levels. The No. 1 and No. 2 cryptocurrencies by market cap are posting a 10% and 15% gain in the last day and look poised for more gains during today’s trading session.

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For more clarity in terms of direction, Bitcoin needs to close the daily candle above $23,000 and Ethereum above $1,700. Data from Material Indicators records an order book for things on the sell side if BTC price can break above its current levels with high odds of reaching $28,000 in the near term.

In longer time frames, macroeconomic conditions will continue to be an obstacle to any sustainable rebound. In that sense, Tobian Adrian, Director of Monetary and Capital Markets of the International Monetary Fund (IMF) predicted more losses in the nascent asset class.

In an interview with Yahoo Finance, Adrian discussed the risk to the crypto market and risky assets like stocks. For digital assets, Adrian thinks the collapse of a stablecoin could drive another leg down. The IMF official said:

There could be more failures in some of the coin offerings, in particular some of the algorithmic stablecoins that have been hit the hardest, and there are others that could fail.

The IMF official referred to the collapse of the Terra (LUNA) ecosystem. This event led to the downfall of Three Arrows Capital, Celsius, and other companies in the crypto industry. Therefore, it contributes to the drop in the price of Bitcoin and other cryptocurrencies.

Adrian states that digital assets could face another similar event, but does not mention a specific Terra-sized project that could trigger it. The IMF official believes stablecoins could increase selling pressure in the nascent industry due to alleged vulnerabilities in collateralizing him:

There is some vulnerability there, because they are not backed up one by one. [Some fiat-backed stablecoins] they’re backed by somewhat risky assets…it’s certainly a vulnerability that some of the stablecoins aren’t fully backed by cash-like assets.

BTC price with significant gains on the 4-hour chart. Source: BTCUSDT Tradingview

Will the crypto market crash if there is a recession like the one in 2008?

In addition to the alleged risk of stablecoins, the IMF official spoke about the potential risk of economic downturn. The United States recently reported its second consecutive quarter of negative GDP, which should technically mean an economic recession.

However, Adrián ruled out that the global market is anything like that in 2008. At that time, the financial sector was exposed to “shadow banking”, hidden assets in the balance sheets of banks that collapse, exacerbating the economic crisis.

Cryptocurrencies could face a major hurdle from international regulators. The IMF official stated that these entities should enforce the securities laws to the 40,000 that, according to him, make up the sector. He added:

Regulating the coins themselves will be difficult, but regulating the entry points, such as exchanges and wallet providers to invest in those coins, is very concrete and doable.

The US Securities and Exchange Commission (SEC) seems to be following this approach. The Commission has launched legal battles with major players in the sector, including payment solutions company Ripple and cryptocurrency exchange Coinbase.

SEC Chairman Gary Gensler has already stated that he is willing to acknowledge that only Bitcoin is outside his jurisdiction. If the Commission becomes more aggressive, the crypto market could suffer as crypto projects struggle to meet the requirements of the regulations.

Related Reading | Bitcoin Bounces Off Consolidation Range, What’s in Store?

This is probably one of the biggest headwinds for the nascent asset class in the coming months, along with macroeconomic conditions. In that regard, the IMF official might be correct, but cryptocurrencies have faced regulatory hostilities since their inception.

This post Why the IMF thinks the crypto market could experience “more sell-offs”

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