The crypto market is reeling under pressure as a result of contagion due to the Terra-LUNA crash in May and liquidity crisis in June, with the U.S. interest rate hike adding more pressure to the “crypto winter”. Now, the International Monetary Fund believes the crypto market could see another sell-off and crypto failures, including stablecoins.
IMF Thinks Stablecoins Risks Crypto Winter Recession
Tobias Adrian, Director of Monetary and Capital Markets for the IMF, in an interview on July 27, believes the crypto market selloff isn’t over as stablecoins could lead to another crypto winter. The recent IMF economic outlook report even shows bleak global economic growth in 2022 and 2023.
“We could see further selloffs, both in crypto assets and in risky asset markets, like equities. There could be further failures of some of the coin offerings — in particular, some of the algorithmic stablecoins that have been hit most hard, and there are others that could fail.”
Another crypto selloff could further fail some cryptocurrencies, especially algorithmic stablecoins and even fiat-backed stablecoins.
Adrian says stablecoins not fully backed by cash and treasuries pose greater risks. He pointed to Tether losing its peg to the US dollar after the Terra-LUNA crash as it is not backed one to one and has risky assets. However, some stablecoins backed by cash reserves are less likely to fail.
