Bitcoin investors heaved a sigh of relief on Wednesday as the popular crypto abruptly reversed course and surpassed the $21,000 threshold as Asian trading hours began, Wednesday.
Since the International Monetary Fund reduced its global growth outlook for this year and 2023, BTC fell below the $21,000 barrier overnight, Forkas reported on Wednesday.
In its worldwide projection, the IMF cautioned that global economies may soon be on the verge of a full-blown recession, noting that the Ukraine-Russia crisis and ongoing COVID lockdowns has dealt a heavy blow to the world’s financial system.
Despite the IMF’s warning of a financial catastrophe, it clarified that the expansion of cryptocurrencies does not pose a threat to global financial stability and emphasized that the recent selloff in the larger cryptocurrency market has eased any lingering worries.
In a dire economic climate, the Fund views inflation and a recession as substantial dangers, but not crypto market volatility.
The IMF’s “Gloomy and More Uncertain” report published on July 26 revealed that despite “dramatic sell-offs” on the cryptocurrency market, the global economy appears impervious to its effects:
“Crypto assets have seen a major sell-off that has resulted 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.”
As of this writing, Bitcoin was trading at $21,351, up 2 percent in the last 24 hours, while Ethereum was changing hands for $1,448 during late trading session in Hong Kong, data from Coingecko show, Wednesday.
BTC fell to a level that has not been seen in over a week on Tuesday, as investor worries rose ahead of a forthcoming interest-rate increase by the US Federal Reserve.
After the global economy contracted for the first time since 2020 as a result of the pandemic and other macroeconomic variables, the IMF is now predicting global growth of just 3.3% for this year and about 3% for the next.
The likelihood of a downturn in the economies of the Group of Seven — the United States, the United Kingdom, France, Italy, Canada, and Germany — is approximately 15 percent, which is four times higher than typical.
The IMF has retained a tough position on cryptocurrencies, especially Bitcoin, advising nations against adopting digital currencies since they are volatile and therefore not safe havens for investments.
However, the Fund appears to have suddenly had a change of heart towards cryptocurrencies. According to some financial experts, digital assets may be a viable substitute to conventional financial instruments that can survive all types of bear markets.
Meanwhile, Bitcoin (BTC) appears to be receiving more political support in the United States, with the country’s third-largest political party publicly endorsing the main digital asset and expressing confidence in its long-term viability.