Definition ∞ Structural market risk refers to inherent vulnerabilities or weaknesses within the fundamental design or operational framework of a market. This type of risk stems from issues such as inadequate regulatory oversight, insufficient liquidity mechanisms, concentration of power among a few entities, or fundamental flaws in market protocols. It is distinct from typical price volatility and can lead to systemic instability or market failures. Addressing structural market risk often requires significant policy changes or protocol redesigns.
Context ∞ In the digital asset space, discussions around structural market risk often center on issues like the decentralization of exchanges, the stability of stablecoins, and the potential for cascading liquidations in decentralized finance protocols. Regulators are increasingly scrutinizing these structural elements to prevent widespread market disruptions. Mitigating these risks is crucial for the long-term health and credibility of the cryptocurrency industry.
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