Contagion
contagion risk
The propagation of stress from one entity / asset to another via balance-sheet, lending, or confidence linkages.
May 2022: Terra collapse → Three Arrows blowup → Voyager / Celsius / BlockFi insolvencies. March 2023: SVB failure → USDC depeg → DAI depeg (because DAI held > 50% USDC backing at the time). StableLens treats correlated-collateral exposure as a first-class risk dimension.
Related terms
- Bank runCoordinated mass redemption that exhausts an issuer's liquid reserves before all holders can be paid.
- DepegA stablecoin trading materially away from its target price ($1 for USD-pegged stables) on a primary venue.
- Recursive lendingBorrowing against deposited collateral, redepositing the proceeds, and looping to amplify exposure.