Bitcoin surpasses $21,000 after IMF clarified that crypto is not a threat to the financial system

Bitcoin investors breathed a sigh of relief on Wednesday as the popular crypto abruptly reversed course and surpassed the $21,000 threshold as Asian trading hours began on Wednesday.

As the International Monetary Fund scaled back its global growth outlook for this year and 2023, BTC has slipped below $21,000 overnight, Forkas reported on Wednesday.

In its global projection, the IMF warned that global economies could soon be on the brink of a full-blown recession, noting that the Ukraine-Russia crisis and ongoing COVID lockdowns have dealt a severe blow to the global financial system.

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IMF clarifies: Crypto is not a threat to financial stability

Despite the IMF’s warning of financial disaster, he clarified that cryptocurrency expansion poses no threat to global financial stability, stressing that the recent sell-off in the larger cryptocurrency market has allayed any lingering concerns.

In a tough economic climate, the fund sees inflation and a recession as significant threats, but not crypto market volatility.

The IMF’s Gloomy and More Uncertain report, released on July 26, revealed that despite “dramatic selloffs” in the cryptocurrency market, the global economy appears resilient to its impact:

“Crypto assets have seen a major sell-off resulting in large losses in crypto investment vehicles and the failure of algorithmic stablecoins and crypto hedge funds, but so far the impact on the larger financial system has been limited.”

Bitcoin shows resilience with a 2% surge at $21,351

At the time of this writing, Bitcoin was trading at $21,351, up 2 percent over the past 24 hours, while Ethereum was changing hands at $1,448 during the late Hong Kong trading session, data from Coingecko showed on Wednesday.

BTC fell to levels not seen in over a week on Tuesday, amid growing investor concerns of an imminent Federal Reserve rate hike.

With the global economy shrinking for the first time since 2020 due to the pandemic and other macroeconomic variables, the IMF forecasts global growth of just 3.3% this year and around 3% next year.

BTC Total Market Cap at $406 Billion on Daily Chart | Source: TradingView.com

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The probability of a downturn in the Group of Seven economies – the United States, the United Kingdom, France, Italy, Canada and Germany – is about 15 percent, which is four times higher than usual.

The IMF has maintained a tough stance on cryptocurrencies, particularly bitcoin, discouraging nations from adopting digital currencies as they are volatile and therefore not safe havens for investment.

However, the fund seems to have suddenly had a change of heart towards cryptocurrencies. According to some financial experts, digital assets can be viable substitutes for traditional financial instruments that can survive all kinds of bear markets.

Meanwhile, Bitcoin (BTC) appears to be gaining more political support in the United States, with the country’s third-largest political party publicly endorsing the key digital asset and expressing confidence in its long-term viability.

Featured image by Watcher Guru, chart from TradingView.com

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