Systemic Risk Indicator refers to a metric or analytical framework used to assess the potential for widespread instability or collapse within a financial system, including the digital asset market. These indicators monitor factors such as excessive leverage, concentrated holdings, interconnectedness between entities, and liquidity mismatches. Their purpose is to identify vulnerabilities that could trigger a cascade of failures. Monitoring these indicators is critical for financial stability.
Context
The development and application of Systemic Risk Indicators for the cryptocurrency market are increasingly discussed in financial news, especially as digital assets become more integrated with traditional finance. Regulators and analysts use these indicators to understand potential contagion effects from crypto market downturns. The absence of comprehensive, standardized indicators remains a challenge for full risk assessment.
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