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Citi Analyst Warns of ‘Serious’ Contagion Risk to Crypto Ecosystem From FTX Failure

News Feed - 2022-11-16 12:11:16

Citi Analyst Warns of "Serious" Contagion Risk to Crypto Ecosystem From FTX Failure


A Citi analyst has warned of a serious risk of broader contagion to the crypto ecosystem stemming from the collapse of crypto exchange FTX, noting that the contagion “can last for a significant amount of time.” He added that the crypto industry seems to have “no significant lender of last resort.” Citi’s Analyst Warns of Broader Contagion to Crypto Ecosystem


Citi analyst Joseph Ayoub explained in an interview with CNBC Friday that the overall cryptocurrency market faces risks of contagion from the implosion of FTX. The troubled crypto exchange filed for Chapter 11 bankruptcy Friday. The Citi analyst cautioned: I think there’s a serious risk of broader contagion to the ecosystem itself.


However, he added: “It’s unlikely that contagion spreads toward broader financial markets, and that’s mainly because of the size of the crypto space, which is only around $830 billion in comparison to the $43 trillion U.S. equity market.”


Ayoub further predicted that companies in the crypto sector will face renewed skepticism and trust issues, but noted that it also means other firms can move to capture more market share now that one of the biggest players has gone under.


“Within cryptocurrencies, it’s unclear as to how far and how deep this goes,” the analyst said, elaborating: Contagion can last for a significant amount of time, and with the amount of companies that are involved and the amount of investments involved with FTX, and following Chapter 11, it could take a long time for this to resolve.


Unlike Binance CEO Changpeng Zhao (CZ), the Citi analyst believes that the FTX crash differs from the 2008 financial crisis when the government stepped in with a massive cash injection and bailed out Wall Street. He opined: It almost seems ironic now that we were previously thinking that Sam Bankman-Fried and FTX were providing some sort of lender of last resort optionality … and now it seems there is no significant lender of last resort.


JPMorgan Chase’s analysts similarly said last week that fewer players in the crypto space are now able to rescue weaker players. “The number of entities with stronger balance sheets able to rescue those with low capital and high leverage is shrinking,” they wrote, predicting that the price of bitcoin could drop to $13K.


Prior to FTX’s bankruptcy filing, Binance was considering acquiring the rival crypto exchange. However, after conducting due diligence, the company decided to walk away from the deal, citing “reports regarding mishandled customer funds and alleged U.S. agency investigations.” Tags in this story Citi, citi bitcoin, citi crypto, citi cryptocurrency, Citi Joseph Ayoub, Cryptocurrency Exchange, ftx, Joseph Ayoub, Joseph Ayoub analysis, Joseph Ayoub bitcoin, Joseph Ayoub crypto, Joseph Ayoub cryptocurrency, Joseph Ayoub FTX


What do you think about the comments by the Citi analyst? Let us know in the comments section below. Kevin Helms


A student of Austrian Economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open-source systems, network effects and the intersection between economics and cryptography. Mark Cuban Says FTX Implosion Isn"t Crypto Blowup — Explains Why He Invests in Crypto FEATURED | 7 hours ago Crypto.com"s Exposure to FTX Less Than $10 Million Says CEO — CRO Token Not Used as Collateral FEATURED | 18 hours ago


Image Credits: Shutterstock, Pixabay, Wiki Commons Previous articleMark Cuban Says FTX Implosion Isn’t Crypto Blowup — Explains Why He Invests in Crypto Next articleUS Lawmaker Urges SEC to ‘Take Decisive Action’ to Regulate Crypto Industry — Plans to Examine Options for Federal Legislation Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article. Read disclaimerShow comments More Popular NewsIn Case You Missed ItFollowing a Brief Fee Spike, Gas Prices to Move Ethereum Drop 76% in 12 Days


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