Oxford University: “cryptocurrencies need to be regulated to avoid financial collapse”

Oxford University researchers say cryptocurrency trading poses a threat totraditional finance and should be strictly regulated during a crisis.

Faculty of Law researchersOxford researchers believe that investors are moving capital into crypto assets when they lose confidence in governments and banks. They explain this by the decentralization and independence of cryptocurrencies from central authorities.

Oxford analystsThe university studied trading volumes in the period from January 1 to March 11. They found that the market capitalization of the 100 major cryptocurrencies grew almost in parallel with the number of reported COVID-19 cases. However, this positive correlation changed when people began to perceive traditional financial markets more positively.

Researchers claim that cryptocurrencythe market exhibits high volatility, disruptions and bubbles. These phenomena, in their opinion, can be explained by “herd behavior,” when a large group of investors exhibit similar behavioral patterns. Researchers have described the current cryptocurrency market as poorly regulated and lacking transparency.

The article argues that the cryptocurrency marketheavily dependent on opinion leaders, such as Telegram channels and websites, to determine the influence of “whales” on the market. Asymmetric information can attract investors into pump-and-dump schemes:

"Sophisticated investors lure uninformedpublic into the cryptocurrency market, creating artificial demand for tokens, and then quickly sell their tokens, leaving uninformed buyers at a loss.”

Researchers are worried that ifuninformed investors will massively perform the same actions, this can lead to a market crash. Since the traditional financial market is somewhat related to cryptocurrency, regulators will have to act quickly to prevent risks to the traditional financial system.

Regulators around the world are taking actionto create rules for managing the cryptocurrency industry. Recently it became known that South Africa plans to tighten regulation of the cryptocurrency business.

</p></p>