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Comment by sebmellen | Hacker News Reader

Can we tell whether or not crypto has caused financial contagion, and, if so, to what degree?

Could crypto be a loose thread that unravels the proverbial “financial blanket”?

It’s really when huge leverage is granted on assumptions that turn false that the market takes a hit. Especially once the underlying assets must be “marked to market” and the value is nil compared to required assumptions.

In retrospect, after the crash.

I'd be pretty surprised if crypto was widely used enough to have a noticeable effect, especially compared to the trillions of dollars printed the past few years. Though for some reason everyone has started blaming Putin for inflation, so maybe people will just blame the inevitable crash on him too

It's far too small to matter. Add up all the stablecoins, DeFi protocols, etc and you'll arrive at a dollar value smaller than single-day drops in individual stocks this year. It's also likely that there is a larger dollar amount of loans backed by just Tesla stock (via Elon Musk) than all crypto loans put together.

Yes, fair point. I only wonder how highly leveraged crypto is w/r/t the “outside world”. The bubble popping would certainly devastate a lot of people I know who are highly invested in crypto. Whether the unraveling comes from loans or other non-existent collateral (see USDT or even USDC), the effects would be significant.

For example: https://www.imf.org/-/media/Files/Publications/GFSR/2021/Oct....

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