Citi Says Crypto Contagion Appears to Have Ceased

Stablecoin outflows have been stemmed and outflows from ETFs have also stabilized, the report said.

AccessTimeIconJul 22, 2022 at 9:05 a.m. UTC
Updated May 11, 2023 at 6:03 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

With numerous brokers and market makers making counterparty exposure disclosures, Celsius Network filing for Chapter 11 bankruptcy protection and staked ether (stETH) returning towards parity, it is likely crypto contagion fears have peaked in the interim, Citi (C) said in a research report on Wednesday.

Staked ether’s discount to ether (ETH) has narrowed, which suggests some liquidity stress may have passed, the bank's report said, adding that the “acute deleveraging phase” has now ended given many of the large brokers and market makers in the sector have disclosed their exposures.

In a further positive sign, stablecoin outflows have been stemmed, the bank said, and outflows from crypto exchange-traded funds (ETF) have also stabilized in recent weeks. Exchange and futures leverage is also “benign,” it added.

Volatility in crypto markets in May and June resulted in a number of “intra-market dislocations,” one of which was the difference between the price of bitcoin (BTC) on Coinbase (COIN) in U.S. dollars versus that on rival exchange Binance in tether (USDT), the note said.

The Coinbase price is normally at a premium, which could reflect new entrants or institutional demand, but the price turned to a discount in May, the note said. This “Coinbase premium” is now also returning towards historical levels, which suggests reduced crypto market stress, the note added.

Citi says crypto markets are probably too small and isolated to have spillover effects into the wider financial markets or the economy, but they can still impact investor sentiment. Contagion fears have likely peaked, at least for the time being, the note added.


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Author placeholder image

Will Canny is CoinDesk's finance reporter.

Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to to register and buy your pass now.

Read more about