Systemic Risk Contagion describes the phenomenon where the failure or distress of one significant entity or protocol within the digital asset ecosystem triggers a cascade of failures across other interconnected platforms. This spreading of risk can occur through shared liquidity, inter-protocol dependencies, or correlated market sentiment. It poses a threat to the stability of the entire market.
Context
The concern about systemic risk contagion is frequently discussed in crypto news, especially following the collapse of major centralized entities or significant DeFi exploits. Analysts often examine the interconnectedness of various protocols and assets to assess potential points of vulnerability. Regulatory bodies are increasingly focused on understanding and mitigating these risks to protect market participants and financial stability.
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