Crypto contagious is the phenomenon of transmission of a problem in one cryptocurrency to another cryptocurrency, or a large widespread impact caused by the problem / collapse of a cryptocurrency on the cryptocurrency market in general. We can see that crypto is contagious from the collapse of a cryptocurrency which causes other cryptocurrencies to fall in price too.
Some examples of crypto contagious are:
1 The fall in Luna’s price, caused the global crypto market to fall too. Many major cryptocurrencies fell above 10%, even though the problem was Luna, but the impact was not only felt by Luna investors, the entire crypto market was facing the problem of a price collapse so that many crypto investors who, even though they did not invest in Luna, also suffered losses as a result. the decline in the cryptocurrency they hold.
2 The fall in the FTT price, FTX is the second largest cryptocurrency exchange in the world, they have the FTT cryptocurrency which is the native crypto of the exchange. FTX’s position can be said to be the same as BNB, which was originally used to finance the cryptocurrency exchange. But then the price of FTT fell, which was triggered by CZ’s statement, the founder of Binance, who would release their FTT. The market reacted by heavily selling FTT. It turns out that the impact of the fall in FTT also resulted in the price of Bitcoin, Ethereum, and Solana, and other cryptocurrencies falling above 10%.
Where did the crypto contagious come from?
There are several causes of crypto contagious, namely:
* The link between one cryptocurrency and another cryptocurrency. This relationship can be created because of cooperation between cryptocurrency developers. For example, FTX collaborates with Solana, in this collaboration FTX exchanges their FTT for Solana coins, so that each party has their partner’s coin. The aim of this collaboration is to increase the diversification of cryptocurrency holdings, and to increase the value of each party’s cryptocurrency. But when one party experiences a problem, the other party is also affected.
* Market worries are exaggerated. Cryptocurrency market participants and investors can become overly concerned about the future of cryptocurrencies when they see a problem with one of the major cryptocurrencies, which has a high market cap, and a large daily transaction volume. This excessive fear causes crypto contagious when there is a cryptocurrency whose price collapses.
* Significant ownership of a problematic cryptocurrency. In the case of FTX, a lot of DeFi are having problems because they have a large FTT token. When the FTT price drops their assets in the form of the FTT evaporate in value. This causes DeFi to experience liquidity difficulties.
Where did the crypto contagious come from?
There are several causes of crypto contagious, namely:
– The link between one cryptocurrency and another cryptocurrency. This relationship can be created because of cooperation between cryptocurrency developers. For example, FTX collaborates with Solana, in this collaboration FTX exchanges their FTT for Solana coins, so that each party has their partner’s coin. The aim of this collaboration is to increase the diversification of cryptocurrency holdings, and to increase the value of each party’s cryptocurrency. But when one party experiences a problem, the other party is also affected.
– Market worries are exaggerated. Cryptocurrency market participants and investors can become overly concerned about the future of cryptocurrencies when they see a problem with one of the major cryptocurrencies, which has a high market cap, and a large daily transaction volume. This excessive fear causes crypto contagious when there is a cryptocurrency whose price collapses.
– Significant ownership of a problematic cryptocurrency. In the case of FTX, a lot of DeFi are having problems because they have a large FTT token. When the FTT price drops their assets in the form of the FTT evaporate in value. This causes DeFi to experience liquidity difficulties.
Impact of crypto contagious in the future?
In the future, crypto contagious will still exist, crypto market players can learn from some of the crypto contagious that have happened, so they can be better prepared to face these risks. Crypto contagious cases will encourage cryptocurrency industry players to diversify their crypto assets, so they don’t experience a big impact when a cryptocurrency experiences problems.
Will crypto contagious ever end and how will it stop?
Crypto contagious will never end, and the cryptocurrency market will always face the risk of this crypto contagious. As in the stock market, when a stock index falls, other exchanges can catch the fall. So this crypto contagious problem will always be a latent danger lurking in cryptocurrencies, investors and crypto market players can only try to minimize the impact of crypto contagious.
Crypto Contagious Linkage with BlokFi
BlokFi is the first crypto lending company in the United States that has filed for bankruptcy on May 6, 2021. This is an example of a “crypto contagious” case where the actions or decisions of one crypto project can affect other crypto projects.
BlokFi’s bankruptcy triggered negative price movements for many crypto projects associated with the company, such as crypto projects that cooperate with BlokFi or crypto projects that use the same technology as BlokFi. This resulted in a change in the overall market trend, whereby many crypto projects experienced a drop in price.
Contagious Crypto History
The term “crypto contagious” first appeared in 2017, when the crypto market was in a very sharp upward price trend. At that time, the price movements of cryptocurrencies such as Bitcoin and Ethereum massively affected the price movements of other cryptocurrencies, thereby triggering changes in the overall market trend.
For example, in 2017, when the Bitcoin price spiked by over $10,000, it sparked positive price action for many other cryptocurrencies. Conversely, when the price of Bitcoin dropped dramatically at the end of 2017, it also affected the price movements of other cryptocurrencies.
In addition, the term “crypto contagious” also appears when the actions or decisions of a crypto project can affect other crypto projects. For example, in 2017, when a crypto project announced that they would be adopting a revolutionary new Blockchain technology, it sparked positive price movements for many other crypto projects that are also using the technology.
Conclusion
The term “crypto contagious” refers to a situation where a massive movement in the price of a cryptocurrency affects the price movement of other cryptocurrencies, thereby triggering a change in the overall market trend. This term can also be used to describe a situation where the actions or decisions of one crypto project can affect other crypto projects. And this will stop if there is a trigger for another bigger trend change.
