Individual Investors to Take Brunt of Crypto Market Collapse

February 20, 2018

Cryptocurrency market crash will produce the greatest effect on independent investors while institutional ones being protected better from probable collapse. That was the conclusion drawn by the S&P Global Ratings researchers.

“At this stage, we think that retail investors would be the first to bear the brunt in the event of a collapse in cryptocurrencies' market value. We expect rated banks to be largely insulated, given that their direct or indirect exposure to cryptocurrencies appears to remain limited”, as their report says.

Market cap of all cryptocurrencies suffers from volatility in 2018. While the index hit the record level of $835 bln at the beginning of the year, it sank three times afterwards. Despite the correction that followed the fall, current capitalization is $330 bln less than that just a month and a half ago.

Curious enough, stock market has crashed either which caused some experts to look for some correlations between them.

S&P Global Ratings members are convinced, however, cryptocurrency collapse is unlikely to impact adversely financial markets.

“For now, a meaningful drop in cryptocurrencies' market value would be just a ripple across the financial services industry, still too small to disturb stability or affect the creditworthiness of banks we rate”, as the head of the S&P Global Ratings financial institutions Mohamed Damak noted.

Damak made it a point that cryptocurrencies have no governmental support so a growing number of watchdogs express their concerns about them being used by speculators and criminals. Given all this he states, the blockchain technology may trigger positive changes in the world economy.

“We believe that the future success of cryptocurrencies will largely depend on the coordinated approach of global regulators and policymakers to regulate and enhance market participants' confidence in these instruments”, Damak concluded.

It is to be underlined that international and global cryptocurrency regulation is becoming the topic of discussion more often with the Bundesbank Executive Board member Joachim Wuermeling and the IMF’s spokesman Gerry Rice having already spoken in support of such practice.

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