With many brokers and market makers disclosing exposure to counterparties, Celsius Classification Chapter 11and staken ether (stETH) returning to parityit is likely that crypto contagion fears have peaked in the meantime, Citi (C) said in a research report on Wednesday.
Ether-staked Ether (ETH) rebate has narrowed, suggesting some liquidity stress may have disappeared, the report says, adding that the “acute deleveraging phase” is now over as many large brokers and market makers in the industry have disclosed their exposures.
In another positive sign, outflows from stablecoins have been stemmed, the bank said, and outflows from crypto exchange-traded funds (ETFs) have also leveled off in recent weeks. Forex and futures leverage is also “benign”, he added.
Volatility in the crypto markets in May and June led to a number of “intra-market dislocations”, one of which was the difference between the price of bitcoin (BTC) on Coinbase in US dollars and that on the exchange competitor Binance in tether (USDT), the note says.
Coinbase’s price is normally higher, which could reflect new entrants or institutional demand, but the price turned into a discount in May, the note said. This “Coinbase premium” is now also returning to historic levels, suggesting reduced stress in the crypto market, the note adds.
Citi says crypto markets are likely too small and isolated to have any impact on financial markets or the broader economy, but they can still impact investor sentiment. Contagion fears have likely peaked, at least for now, the note adds.