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Dark side of cryptocurrency: understanding of the effects of systemic risk
Cryptocurrency rug brought significant changes in how people think and interact with money. From the decentralized funding programs (Defi) to the original coin proposal (ICO) cryptocurrency has become an integral part of the global economy. However, there is a comprehensive risk network that poses a risk to financial stability.
What is systemic risk?
The systemic risk is subject to the potential for the financial crisis or panic to disseminate and affect not only the directly affected assets, but also the entire broader financial system. In other words, systemic risk is the risk that failure in one part of the financial system can lead to major failures in the road sectors.
Effect on Markets
Cryptocurrencies were associated with several significant market accidents including:
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- 2018: Market market volatility : Because more institutions and individuals have come to the market, prices have risen dramatically to collapse when market variability and regulatory uncertainty have risen.
- 2020: Pandem Covidid-19 effect of cryptocurrency market : During the Government Government, they have imposed travel restrictions and blocks, resulting in cryptocurrency market fallen.
Why is the systemic risk problem is cryptocurrency?
Cryptocurrencies operate regardless of traditional financial systems, which means that their value is not directly related to any particular property or market. However, this also means that they can be vulnerable to systemic risks if the wider market market is undergoing major disorders.
The main risk associated with the systemic risk of cryptocurrency
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Systemic Risk Reduction in Crypts Markets
While the risk of cryptocurrency system is significant, there are actions that can be taken to facilitate:
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- Diversification strategies
: Investors can diversify their portfolios by investing in various assets, including traditional names, bonds and promotions.
Conclusion
Cryptocurrency may disrupt the financial world, but its decentralized nature is also vulnerable to systemic risk. As market players continue to focus on this difficult environment, understanding the impact of the system on markets is very important to facilitate potential risks and stability.
By recognizing the risks associated with the cryptomenon system and taking measures to facilitate them, we can try to create a safer and more stable financial environment in all countries involved in these markets.