Crypto contagion? What Terra’s ‘Lehman Brothers’ moment means for markets

Fortune/Will Daniel and Taylor Locke/5-12-2022

“The overarching and justified concern is that this first major confidence crisis sends a shiver through smaller investor sentiment as margin calls of any ilk tend to do, Retail investors have traditionally played the role of the canary in market selloffs. Because crypto is where so many smaller investors have placed their bets, the losses sustained could become a driver of a broader risk-off move in the stock market.” – Danielle DiMartino Booth, Quill Intelligence

USAGOLD note: It is interesting to note that Treasury Secretary Yellen found it necessary to offer a few words of assurance on the crypto meltdown in testimony before Congress last week. “I wouldn’t characterize it at this scale as a real threat to financial stability,” she said, “but they’re growing very rapidly and they present the same kind of risks that we have known for centuries in connection with bank runs.” In the case of Terra’s crash, there was no time for a run on the bank. It took roughly a week for it to go from $87 a token to zero. The problem with contagion is that once it surfaces, no one can be certain what might be affected next and how widespread the damage can become. The black swan often travels in the dark.

Terra Luna cryptocurrency
(In USD)

line chart showing the collapse of the terra luna crypto token
Chart courtesy of

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