Crypto market is 'too small' for FTX collapse to cause contagion - Citi

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By Senad Karaahmetovic 

Citi strategists have brushed off comments that the ongoing crisis in the crypto market could spill over to the rest of financial markets.

The cryptocurrency market, which has a total market capitalization of about $800 billion, is "too small to affect financial markets," the strategists told Citi's clients in a note. Similarly, both Bitcoin (BTC) and Ethereum (ETH) are "small" compared to the top ten S&P 500 constituents. Overall, the crypto market cap is about 2% of the U.S. equity market cap (c$41 trillion).

"If all crypto were held in the US, even at its peak, it never would have made up a significant percentage of wealth. Thus, we think the impacts of significant idiosyncratic events, such as those in the past week, on broader financial markets should be relatively minimal," the strategists said in a client note.

Citi strategists also add that the FTX collapse is smaller relative to previous such crypto events, like Luna or Celsius. However, the importance of the FTX for the wider crypto ecosystem is higher, given it was the second-largest spot and derivative exchange in the market.

"When compared to larger tech losses this year, FTX's hole seems relatively minor, hence the contagion to financial markets outside of crypto should remain limited," the strategists added.

As of 06:45 ET (11:45 GMT), Bitcoin price is up nearly 3% on the day.