$2,200,000,000,000 Banking Giant Citi Says Crypto Contagion Likely Has Passed: Report
An analyst from banking titan Citigroup reportedly says the crypto contagion that has affected the industry in recent months is likely over.
In a recent note to clients as cited by Seeking Alpha, Citi analyst Joseph Ayoub says the contagion triggered by the collapse of the Terra ( LUNA ) ecosystem has likely peaked as signs of liquidity stress fade.
The analyst also highlights the recent volatility of bet Ethereum (STETH), a token that is supposed to be linked to the price of Ethereum (ETH) and bet on the crypto-liquidity protocol Lido.
Ayoub notes that crypto-lending firm Celsius held over 401,000 stETH when it filed for bankruptcy, which the Citi analyst says may have caused stETH to move away from parity as speculators sold the asset fearing a liquidation event.
On June 24, the STETH/ETH pair fell to as low as 0.87 before finally regaining the link.
According to Ayoub, the couple’s recovery is a sign that “the acute downsizing phase is now over.”
As for fears that the contagion in the crypto world could spread to the traditional financial space, Ayoub says those concerns are likely invalid due to the relatively small size of the digital asset market compared to the rest of the financial world.
The analyst also says that most entities in traditional finance have not entered the crypto markets due to regulatory uncertainty, and therefore will not be affected by the nascent industry’s struggles.
“We believe most mainstream financial firms are waiting for further regulatory clarity or are still at an early stage of exploring crypto investments… We therefore do not believe per se that the crypto market will spread into a wider contagion.”
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