Once again this year, we would like to sweeten the Advent season for our readers with an Advent calendar. In a slightly different form, each door contains a “knowledge bomb”, which will be supplemented with an extraordinary special prize on Christmas Day.
Behind the nineteenth door is the term “Contagion Effect”. To enter the giveaway on the 24th, simply participate in the polls and like the respective Twitter posts.
Contagion effect
In traditional economics, the contagion effect refers to the spread of an economic crisis or boom across countries/regions. The more interconnected the affected markets are, the higher the probability of a spreading crisis. The phenomenon can also be observed in individual asset classes – as was the case in crypto markets last year.
The same pattern has run through many historical financial crises: a perfect market environment tempts success-addled players and speculators to increase their appetite for risk in search of even higher returns. When the spiral of credit-financed investment excesses ends, the most foolhardy fall first. Over time, the subsequent contagion effect brings out all those who gambled too high. First Three Arrows Capital, then the centralized lenders (Celsius, BlockFi, Genesis) and finally the FTX/Alameda construct.
