Will we all feel the pain of the digital token market’s latest meltdown?

And this means that investors could be forced to sell bonds or shares to cover losses, or to meet margin calls on their crypto investments.

“Movements in bitcoin prices are associated with a non-trivial share of the variation in US equity prices,” the note warns.

Still, it’s arguable that the vicious crypto winter – the market cap of the sector has slumped to less than $US1 trillion from a peak of $US3.2 trillion last November – has caused many traditional investors to lose their appetite for such speculative assets.

‘Too small, too siloed’

And this would limit the contagion effects from the latest crypto crisis.

“We believe cryptocurrency markets remain too small and too siloed to cause contagion in financial markets, with an $US890 billion market cap in comparison to US equity’s $US41 trillion,” Citi analysts argued in a research note.

Deutsche Bank analyst Marion Laboure argued the FTX collapse could result in the crypto ecosystem being edged closer to the established financial sector.

That’s because the FTX implosion has highlighted well-known structural problems in the sector, such as “insufficient reserves, conflict of interest, a lack of regulation and transparency, and unreliable data.”

According to Laboure, regulators “should quickly require crypto companies to comply with the rules imposed on traditional investment products.

“This would restrict crypto companies from fishing for financially illiterate consumers while governments develop overarching regulatory frameworks.”