Global economy

Did the oil market crash influence the crypto market?

Crude oil contracts for May delivery plunged into negative territory of -$37 per barrel. How can an asset, especially a valuable scarce resource such as oil, have a negative price? In simple terms, oil storage facilities worldwide are full due to the economic turmoil triggered by the coronavirus pandemic, and since oil storage is a costly business, people were willing to pay to get rid of it.

The unprecedented oil crash hasn’t caused a serious immediate impact on crypto market. Major cryptos such as Bitcoin and Ethereum slipped around 4-6%, which is within the normal daily volatility range.

While economists around the world are anticipating long-lasting repercussions of such a dramatic oil crash, traders are betting on which safe-haven assets society will be most confident in during the impending recession. Some crypto influencers argue that legacy markets are flawed, because even the news of a record 3.3 million U.S. jobless claims was followed by an immediate rally in the stock market.

According to a recent report by Binance research, cryptos performed better than many other assets during the first quarter of 2020.

Central banks vs. cryptos

Financial watchdog recommends to regulate or ban stablecoins

The G20’s Financial Stability Board (FSB), an international body which monitors the global financial system, released a consultative document with ten recommendations on how to regulate stablecoins. According to the FSB, the wide adoption of crypto stablecoins could introduce significant risks to financial stability unless governments introduce strict regulations.

Stablecoins are fiat-pegged cryptocurrencies that usually fall into two categories: centralized or decentralized. The FSB suggested to regulate centralized stablecoins and completely ban fully decentralized stablecoins, since they cannot be easily regulated. The recommendations propose strong cross-border cooperation to make sure companies that issue stablecoins cannot avoid the regulations by hiding in certain jurisdictions.

Even though the document is only consultative in nature, many experts see it as a coordinated move against stablecoins of all varieties: from well-established Ethereum-based stablecoins such as USDT, USDC, and DAI, to the stablecoins that are still in development like Facebook’s Libra project. This month, Tether minted $600 million USDT tokens for an “Inventory Replenishment”, reaching a new $7 billion market cap.

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