IMF Global Outlook Predicts Dark Clouds Ahead for Crypto Markets
Investors are warned of further volatility in the Digital Currency and Asset Markets as the International Monetary Fund (IMF) forecasts a slowdown in global economic growth.
The IMF is July update on the World Economic Outlook titled “Gloomy and More Uncertain” states to “higher-than-expected inflation,” and a reduction of global output as key indicators of incoming poor macroeconomic growth. The report states in succinct terms that there are likely economic slowdowns ahead:
“The risks to the outlook are overwhelmingly tilted to the downside.”
Macroeconomic factors have been linked to the bearish trend in the Cryptocurrency Market, prompting Cryptocurrency analyst Miles Deutscher to warn his 154,000 followers on twitter to expect volatile markets in the upcoming months.
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He said that the incoming quarterly earnings reports from the likes of Microsoft, Google, Apple and Meta, along with the quarterly Gross Domestic Product (GDP) numbers from the United States, might create further turbulence in the market and weaken investor sentiments.
Cryptocurrency investors are also expecting a hike in interest rates by the FED in the United States this week. Bloomberg reported on Tuesday that the FED is expected to hike rates by as much as 75 basis points, or 0.75%, up to 2.25% in an attempt to tighten its monetary policy and control high inflation.
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There are also industry experts who expect the U.S. to be officially in recession when the Q2 GDP data for the country are published on 28th July. According to Investopedia, an economy is known in recession when the GDP grows negatively for two consecutive quarters.
Cryptocurrency Market YouTuber DustyBC tweeted on Tuesday that the global slump coupled with potentially reduced U.S. GDP numbers is probably the reason to explain why Bitcoin (BTC) price dipped below $21,000.
Meanwhile, founder of Cosmos-based cross-chain decentralized finance (DeFi) hub Umee Brent Xu asked on Monday in a tweet, “Does a macro recession = a crypto recession?”
Cointelegraph quoted the Material Indicators Twitter account on Monday, reporting that there is “no guarantee that any support holds” after the GDP and interest rate figures are announced. It added that there may be several days of volatile markets, echoing Deutscher’s observations.
Elizabeth Gail wrote in Cointelegraph on Tuesday that BTC markets were expected to recover when the ambiguity around the current state of the economy and geopolitical tensions are resolved. However, there is no solid prediction on how long that will take.
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While the economic outlook looks gloomy, the IMF pointed out that the sell-offs in Cryptocurrency space since May occurred due to liquidations, bankruptcies and losses and fall of major firms like Celsius, Three Arrows Capital and Voyager Digital Holdings that had little impact on other financial systems.
This suggests that as the broader financial systems can have a massive effect on Cryptocurrency Market, the same cannot be said the other way around:
“Crypto assets have experienced a dramatic sell-off that has led to large losses in crypto investment vehicles and caused the failure of algorithmic stablecoins and crypto hedge funds, but spillovers to the broader financial system have been limited so far.”
According to the TCAP Index, as of the time of writing, the total Cryptocurrency Market capitalization is sitting just barely over $1 trillion.
Unsatisfactory earnings reports and GDP numbers this week could spoil the current levels as Cointelegraph reported on Monday that investors are already starting to seek shelter in fiat in grounding for the worst.
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