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RESEARCH

A Financial Meltdown Could Be On Its Way, International Monetary Fund Warns

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Hey debt levels, relax for a bit

No one can predict the next financial crisis, but the International Monetary Fund believes one may be looming as debt levels reach new highs.

According to the report, global debt levels in 2018 are estimated to be far higher than the levels seen before the 2008 financial crisis as the public and private debt together surged 60% to a total of $182 trillion.

As for government debt to GDP ratios, numbers prior to the financial crisis hovered around 36% while numbers now have topped 52%.

Developing economies have skyrocketed

In addition to the alarming debt levels the IMF reported, the researchers discussed the implications of developing economies growing too fast.

Following the 2008 financial crisis, developing economies have swallowed an extra 16% of global GDP after launching from 44% in 2008 to 60% in 2018.

While this looks like developing economies are doing well, it also showcases that advanced economies have had a weak recovery in comparison.

The IMF acknowledged crypto

After the IMF discussed possible risks that could cause the next financial crisis, it also pointed out that cryptocurrencies may pose a risk themselves.

The report asked regulators to remain vigilant as assets move into the digital realm:

“Despite its potential benefits, our knowledge of its potential risks and how they might play out is still developing. Increased cybersecurity risks pose challenges for financial institutions, financial infrastructure, and supervisors. These developments should act as a reminder that the financial system is permanently evolving, and regulators and supervisors must remain vigilant to this evolution and ready to act if needed.”
Bitcoin as a hedge?

Bitcoin and other cryptocurrencies have yet to experience a global financial meltdown since they have only been around since 2009.

So far, researchers have seen a close to 0% correlation between Bitcoin and global markets, however, Bitcoin is still a relatively new asset.

Although, if Bitcoin retained its 0% correlation with global markets during a recession, investors could seek Bitcoin as the next greatest hedge in their portfolios.



RESEARCH

54% of Institutional Investors Believe Bitcoin is at its Bottom

Time to jump in

According to a survey conducted by Fundstrat Global Advisors, 54% of institutional investors believe that Bitcoin has already hit its low price for the year. Not only do these respondents think Bitcoin has bottomed, but 57% of them also have a price target higher than $15,000 for 2019.

Institutional investors see Bitcoin’s decline as a perfect opportunity to enter the market. As time passes, Bitcoin is being more accessible to institutional investors and is becoming a legitimate part of firms’ strategies

Crypto Twitter not as bullish

Fundstrat’s Tom Lee also ran a similar poll on Twitter to get retail investor’s perspective. Surprisingly, Crypto Twitter is not quite as bullish as institutional investors.

66% of the Twitter respondents predict that Bitcoin will fall even further and only 40% predict Bitcoin to reach $15,000 in 2019.

The discrepancy between institutional investors and Crypto Twitter is probably due to the fact that institutional investors are more level-headed and trading with less emotion. Crypto Twitter has been around for the highs of late last year and could be too discouraged by the drop off.