Bitcoin breaks past $21,000 after the IMF clarified that crypto does not threaten the financial system

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

Since the International Monetary Fund lowered its global growth outlook for this year and 2023, BTC fell below the $21,000 barrier overnight, Forkas reported on Wednesday.

In its worldwide forecast, 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-19 shutdowns have dealt a heavy blow to the world’s financial system.

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The IMF makes it clear: Crypto is not a threat to financial stability

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, stressing that the recent selloff in the larger cryptocurrency market has eased any lingering concerns.

In a severe economic climate, the fund sees inflation and a recession as significant dangers, but not volatility in the crypto market.

The IMF’s “Gloomy and More Uncertain” report published on July 26 revealed that despite “dramatic sell-offs” in the cryptocurrency market, the global economy appears impervious to the effects:

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

Bitcoin shows resilience with 2% rise to $21,351

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

BTC fell to a level not seen in over a week on Tuesday as investor concerns rose ahead of an upcoming rate hike 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 now forecasts global growth of just 3.3% for this year and around 3% for the next.

BTC total market cap at $406 billion on the daily chart | Source: TradingView.com

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The probability of a slowdown in the economies of the Group of Seven – the US, UK, 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, advising nations against adopting digital currencies as they are volatile and therefore not safe havens for investment.

However, the fund seems to have suddenly changed its stance on cryptocurrencies. According to some financial experts, digital assets can be a viable substitute for conventional financial instruments that can survive any kind of bear market.

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

Featured image from Watcher Guru, chart from TradingView.com