Questions I have now: 1) How likely is a cascade of bank runs on other exchanges? 2) Do other exchanges have security issues or insolvency that make them particularly vulnerable? 3) Will one of the other cryptocurrencies wax as confidence in BTC wanes?
1) unlikely, since cascading bank runs are usually a result of fractional reserve banking. Depositors in a collapsed bank are unable to pay off loans in another bank, causing collateral damage to this other bank. 2) do other exchanges have security issues? Yes. Are they vulnerable? Only time will tell. I would take Mandelbrot's modeling of insurers (banks are "insurers" of sorts) in "the (Mis)behaviour of markets[0]"…
This obviously results in the crash of the exchange rates, and probably a reduction in the usage of the currency as well. Getting paid in something that has little use of it's own doesn't help you.
Now, on #3, you said "in a rational world"... But this isn't a rational world, so the rest of this sentence doesn't apply.
The reality is like loss of confidence is very powerful, and it could, as the document noted, destroy BTC for the near and possibly medium term.