The contempo phenomenon of people moving their assets into crypto every bit a safe haven in responding to the financial crunch has drawn the attending of the academic world.

Per an Oxford University Law Faculty blog mail from April 17, researchers have observed that crypto trading could pose a threat to traditional finance and information technology should be strictly regulated in the times of crisis to prevent systemic risk to the system.

Investors in cryptocurrencies reply to global crises

Researchers say that as crypto transactions are decentralized and don't rely on any cardinal authority, investors tend to motility their majuscule into crypto when they lose their trust in governments and banks in lodge to secure their funds.

The researchers examined the trading volumes between Jan. i and March 11. They found that the meridian 100 cryptocurrencies increased along with the number of reported COVID-xix cases. However, this positive correlation reversed when people started to respond more positively towards the traditional fiscal market.

Herding behavior may cause systemic chance

Researchers argued the cryptomarket shows high volatility, crashes, and bubbles, phenomena which can possibly be explained through herding behavior where a large grouping of investors behaves similarly.  They as well described the current crypto market equally lightly regulated and lacking in transparent information.

The crypto market place depends heavily on "marketplace influencers" such as designated Telegram channels and websites detecting market movement past "whales." Asymmetric data may attract investors into "pump-and-dump" schemes. The blog says:

"Sophisticated investors lure uninformed investors into the cryptomarket by creating an bogus demand for tokens and then swiftly selling their tokens, leaving the uninformed investors with a loss."

Researchers worried that if uninformed investors engage in herd behaviour this could lead to a market crash. Since the traditional financial marketplace has now related to the cryptomarket and the crypto market is likely to stay, regulators may need to act fast to regulate the cryptomarket to prevent the systemic gamble of the traditional financial system.

Equally Cointelegraph reported previously, the members of the J5 countries recently updated their crypto laws in response to cybercriminals operating during the pandemic. Other enquiry recently showed that crypto prices responded well to articulate regulation.