{"id":454121,"date":"2022-05-28T12:19:00","date_gmt":"2022-05-28T09:19:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/mark-hulbert-how-a-crypto-crash-could-spread-to-treasury-bonds-and-other-fixed-income-securities\/"},"modified":"2022-05-28T12:19:00","modified_gmt":"2022-05-28T09:19:00","slug":"mark-hulbert-how-a-crypto-crash-could-spread-to-treasury-bonds-and-other-fixed-income-securities","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/mark-hulbert-how-a-crypto-crash-could-spread-to-treasury-bonds-and-other-fixed-income-securities\/","title":{"rendered":"#Mark Hulbert: How a crypto crash could spread to Treasury bonds and other fixed-income securities"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3d820353b55\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3d820353b55\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/mark-hulbert-how-a-crypto-crash-could-spread-to-treasury-bonds-and-other-fixed-income-securities\/#%E2%80%9CMark_Hulbert_How_a_crypto_crash_could_spread_to_Treasury_bonds_and_other_fixed-income_securities%E2%80%9D\" >&#8220;Mark Hulbert: How a crypto crash could spread to Treasury bonds and other fixed-income securities&#8221;<\/a><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/mark-hulbert-how-a-crypto-crash-could-spread-to-treasury-bonds-and-other-fixed-income-securities\/#Bitcoin_and_other_cryptocurrencies_could_be_hazardous_to_your_wealth_%E2%80%94_even_if_you_never_invest_in_them\" >Bitcoin and other cryptocurrencies could be hazardous to your wealth \u2014 even if you never invest in them<\/a><ul class='ez-toc-list-level-6' ><li class='ez-toc-heading-level-6'><ul class='ez-toc-list-level-6' ><li class='ez-toc-heading-level-6'><ul class='ez-toc-list-level-6' ><li class='ez-toc-heading-level-6'><ul class='ez-toc-list-level-6' ><li class='ez-toc-heading-level-6'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/mark-hulbert-how-a-crypto-crash-could-spread-to-treasury-bonds-and-other-fixed-income-securities\/#Why_no_contagion_from_TerraUSDLUNA\" >Why no contagion from TerraUSD\/LUNA?<\/a><\/li><\/ul><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/buradabiliyorum.com\/en\/mark-hulbert-how-a-crypto-crash-could-spread-to-treasury-bonds-and-other-fixed-income-securities\/#Mark_Hulbert\" >Mark Hulbert<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"%E2%80%9CMark_Hulbert_How_a_crypto_crash_could_spread_to_Treasury_bonds_and_other_fixed-income_securities%E2%80%9D\"><\/span>&#8220;Mark Hulbert: How a crypto crash could spread to Treasury bonds and other fixed-income securities&#8221;<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<h2 class=\"article__subhead\" itemprop=\"alternativeHeadline\"><span class=\"ez-toc-section\" id=\"Bitcoin_and_other_cryptocurrencies_could_be_hazardous_to_your_wealth_%E2%80%94_even_if_you_never_invest_in_them\"><\/span>\n  Bitcoin and other cryptocurrencies could be hazardous to your wealth \u2014 even if you never invest in them<br \/>\n<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><\/p>\n<div class=\"column column--full article__content\">\n<div class=\"article__side\">\n<div class=\"container--sticky not-active\">\n<div id=\"cx-next\" data-nosnippet>\n              <\/div>\n<\/p><\/div>\n<\/p><\/div>\n<div id=\"js-article__body\" class=\"article__body article-wrap at16-col16 barrons-article-wrap\" itemprop=\"articleBody\" data-sbid=\"WP-MKTW-0000907425\" role=\"document\">\n<div class=\"barrons-article-ad-wrapper\">\n<div data-track=\"barrons-article-ad-wrap\" class=\"barrons-article-ad sticky_item\">\n<div class=\"barrons-main-article-ad-target sticky_target body_ad\" aria-hidden=\"true\"><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<div data-layout=\"\n                inline\" data-layout-mobile=\"\" class=\"\n          media-object\n          type-InsetArticleReader\n              \n              inline\n  article__inset\n          article__inset--type-InsetArticleReader\n              article__inset--inline\n  \"><\/p>\n<div class=\"media-object-article-reader\">\n<div class=\"audioplayer\" data-sbid=\"WP-MKTW-0000907425\" role=\"region\" aria-label=\"Listen to Article\" tabindex=\"-1\" id=\"articlereader\" data-show-title=\"false\" data-theme=\"wsj-article-reader\" data-show-header=\"false\" data-show-subscribe=\"false\" data-ads-enabled=\"true\" data-save-publication=\"false\">\n        <\/div>\n<\/p><\/div>\n<\/p><\/div>\n<p>       A cryptocurrency crash could have repurcussions well beyond crypto itself. Contagion could spread to the fixed-income market, and then to other financial markets as well.<\/p>\n<p> That\u2019s the investment implication of a new study out of Yale University that began circulating in academic circles earlier this month. Entitled \u201c<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/ssrn.com\/abstract=4106815\" class=\"icon none\">How the cryptocurrency market is connected to the financial market<\/a>,\u201d the study was conducted by Sang Rae Kim, a doctoral candidate in Yale\u2019s economics department.<\/p>\n<div class=\"paywall\">\n       The study\u2019s findings are surprising, since there was no obvious contagion in early May from the collapse of TerraUSD<br \/>\n        USTUSD,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/235210788\/realtime\" class=\"positive\">+1.67%<\/bg-quote><br \/>\n      \/LUNA<br \/>\n        LUNAUSD,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/232264652\/realtime\" class=\"\">-1.84<\/bg-quote><br \/>\n       to the fixed-income market <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/general\/\" data-internallinksmanager029f6b8e52c=\"3\" title=\"General\" target=\"_blank\" rel=\"noopener\">general<\/a>ly. This led many who had been worried about possible contagion to breathe a sigh of relief.<\/p>\n<p>We shouldn\u2019t be breathing easier, according to the new study. The TerraUSD-LUNA debacle tells us nothing about the impact of a sudden decline in bitcoin<br \/>\n        BTCUSD,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/31322028\/realtime\" class=\"positive\">+0.37%<\/bg-quote><br \/>\n       or other large cryptocurrency, Kim told me in an interview.<\/p>\n<p>To understand what the study found, it\u2019s helpful to distinguish between the different kinds of cryptocurrencies:<\/p>\n<ul class=\"articleList\">\n<li>\n      <strong>Fiat cryptocurrencies<\/strong>. This category includes the thousands of blockchain-based coins that are not backed by any collateral. Bitcoin, ethereum<br \/>\n        ETHUSD,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/108573964\/realtime\" class=\"positive\">+1.06%<\/bg-quote><span>,<\/span><br \/>\n       binance coin<br \/>\n        XTZS,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\" class=\"negative\">-8.05%<\/bg-quote><span>,<\/span><br \/>\n       shiba inu<br \/>\n        SHIBUSD,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/231473891\/realtime\" class=\"\">0.38<\/bg-quote><span>,<\/span><br \/>\n       and dogecoin<br \/>\n        DOGEUSD,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/226077044\/realtime\" class=\"positive\">+1.02%<\/bg-quote><br \/>\n       are among the better-known fiat cryptocurrencies. Their prices fluctuate with supply and demand.<\/p>\n<\/li>\n<li>\n      <strong>Stablecoins<\/strong>. These are cryptocurrencies designed to maintain a constant value, such as $1 U.S. dollar. Crucially, there are two different types of stablecoins:<\/p>\n<\/li>\n<li>\n      <strong>Algorithmic stablecoins<\/strong>. These stablecoins maintain their value according to an algorithmic relationship to other cryptocurrencies.\u00a0<\/p>\n<\/li>\n<li>\n      <strong>Collateralized stablecoins<\/strong>. These stablecoins maintain their value by being backed by non-crypto assets, such as commercial paper and U.S. Treasury securities.<\/p>\n<\/li>\n<\/ul>\n<p>The channel that contagion would follow from, for example, a bitcoin crash to the financial markets generally would be via collateralized stablecoins, Kim told me. Three-quarters of the time when investors buy or sell a fiat cryptocurrency, a stablecoin is on the other side of the transaction. And Tether and USD Coin<br \/>\n        USDCUSD,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/226472410\/realtime\" class=\"\"><\/bg-quote><br \/>\n       together account for more than 80% of the total market capitalization of all stablecoins.<\/p>\n<p>Specifically, the causal chain would operate as follows:<\/p>\n<ol class=\"articleList\">\n<li>\n      Bitcoin and other large cryptocurrencies would fall in price as investors sell.<\/p>\n<\/li>\n<li>\n      The market cap of collateralized stable coins would increase as investors park the proceeds of their sales.<\/p>\n<\/li>\n<li>\n      The managers of the collateralized stablecoins would need to purchase the necessary collateral to back their increased market cap \u2014 most prominently, commercial paper and U.S. Treasury securities.<\/p>\n<\/li>\n<li>\n      This would cause the price of that collateral to increase and their yields to fall.<\/p>\n<\/li>\n<\/ol>\n<p>This causal chain isn\u2019t just hypothetical. Kim closely analyzed daily changes in the market caps of cryptocurrencies, collateralized stablecoins, the commercial paper market, and commercial paper and Treasury yields, and found that they are correlated to each to a statistically significant extent.<\/p>\n<p>To illustrate the magnitude of the contagion, Kim estimated what could h<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>en to commercial paper and Treasury yields if the three largest fiat cryptocurrencies suffered a one-day decline in the 5% to 10% range. That\u2019s big, but hardly rare. If cryptocurrency holders were to panic, which by no means is out of the question, these fiat cryptocurrencies could experience a much bigger one-day decline.<\/p>\n<p>Nevertheless, Kim estimates that a 5% to 10% daily decline in the largest cryptocurrencies would cause commercial paper yields the next day to fall 20 basis points and Treasury yields by 17 basis points \u2014 with their prices rising by a corresponding extent. Those are big changes for a single day, and we should all sit up and take notice.<\/p>\n<div id=\"cx-membership-tile\"><\/div>\n<h6><span class=\"ez-toc-section\" id=\"Why_no_contagion_from_TerraUSDLUNA\"><\/span><strong>Why no contagion from TerraUSD\/LUNA?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h6>\n<p>Kim\u2019s analysis therefore helps us understand why there was no contagion from the collapse of TerraUSD and LUNA: Since no financial market assets were being used to collateralize these algorithmic stablecoins, their collapse had little impact beyond those investing in them.<\/p>\n<p>This isn\u2019t Monday morning quarterbacking to point this out. In his research, which Kim completed before the TerraUSD\/LUNA fiasco, he found no statistically significant correlation between changes in market cap of algorithmic stablecoins and the yields on commercial paper and U.S. Treasurys.<\/p>\n<p>The bottom line? The financial markets\u2019 muted reaction to the collapse of TerraUSD and LUNA provides false comfort. Like it or not, we\u2019re all vulnerable to a crypto crash.<\/p>\n<p><em>Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">news<\/a>letters that pay a flat fee to be audited. He can be reached at <\/em><em>mark@hulbertratings.com<\/em><\/p>\n<p><strong>More:<\/strong> Ethereum could \u2018take over everything\u2019, and there won\u2019t be a multi-chain future, says EY\u2019s blockchain leader<\/p>\n<p><strong>Also read: <\/strong>Guggenheim\u2019s Minerd believes fine art, real estate will outperform stocks, sees bitcoin bottoming at $8,000<\/p><\/div>\n<\/div><\/div>\n<p><\/p>\n<div class=\"byline article__byline\">\n<p>    <span>By<\/span><\/p>\n<div class=\"author mobile-scrim hasMenu\" data-scrim='{\"type\":\"author\",\"header\":\"Mark Hulbert\",\"subhead\":\"The Wall Street Journal\",\"list\":[{\"type\":\"link\",\"icon\":\"bio\",\"url\":\"https:\/\/www.marketwatch.com\/topics\/journalists\/mark-hulbert\",\"text\":\"Biography\"},{\"type\":\"link\",\"icon\":\"twitter\",\"url\":\"https:\/\/twitter.com\/MktwHulbert\",\"text\":\"@MktwHulbert\"},{\"type\":\"link\",\"icon\":\"email\",\"url\":\"http:\/\/www.marketwatch.com\/news\/mailto:contributors@marketwatch.com\",\"text\":\"contributors@marketwatch.com\"}]}' itemscope itemprop=\"author\" itemtype=\"http:\/\/schema.org\/Person\">\n<h4 itemprop=\"name\"><span class=\"ez-toc-section\" id=\"Mark_Hulbert\"><\/span>Mark Hulbert<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p><ufc-follow-author-widget product=\"marketwatch\" author-id=\"124_MW\" author-name=\"Mark Hulbert\" signin-url=\"https:\/\/accounts.marketwatch.com\/login?target=https%3A%2F%2Fwww.marketwatch.com%2Fstory%2Fhow-a-crypto-crash-could-spread-to-treasury-bonds-and-other-fixed-income-securities-11653639671%3Frss%3D1%26siteid%3Drss\" panda-api=\"https:\/\/follow-api.marketwatch.com\"><\/ufc-follow-author-widget><\/p><\/div>\n<\/div>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more News articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/news\/\" target=\"_blank\" rel=\"noopener\">News category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"http:\/\/www.marketwatch.com\/news\/story.asp?guid=%7B20C05575-04D4-B545-7DD8-A15B2CED00A0%7D&#038;siteid=rss&#038;rss=1\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;Mark Hulbert: How a crypto crash could spread to Treasury bonds and other fixed-income securities&#8221; Bitcoin and other cryptocurrencies could be hazardous to your wealth \u2014 even if you never invest in them A cryptocurrency crash could have repurcussions well beyond crypto itself. Contagion could spread to the fixed-income market, and then to other financial&#8230;<\/p>\n","protected":false},"author":1,"featured_media":454122,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.mktw.net\/im-553120\/social","fifu_image_alt":"","footnotes":""},"categories":[70897],"tags":[],"class_list":["post-454121","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/454121","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=454121"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/454121\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/454122"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=454121"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=454121"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=454121"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}