Dark Side Crypto Currency: Understanding System Risk Influence
The rise of the Crypto currency has made significant changes in the way people think and communicate with money. From decentralized finances applications (Dead) to initial offers of coins (ICO), the crypto currency has become an integral part of the global economy. However, below the surface of this innovation is a complex risk network threatening financial stability.
What is the systemic risk?
Systemic risk refers to the potential for the financial crisis or panic spread and affects not only the property that is directly affected, but also the wider financial system as a whole. In other words, the systemic risk is that the failure in one part of the financial system can lead to wide failures in multiple sectors.
Impact on markets
Crypto currencies are associated with several high market collisions including:
- 2013: Bubble Bitcoin cracks : When investors began to question the sustainability of Bitcoin’s price, its value fell by over 80%, deleting billions of dollars in wealth.
- 2018: Pictures of volatility of the crypto market : As more institutions and individuals have entered the market, prices have increased, only to reduce when concern about the market and regulatory uncertainty have grown.
- 2020: The influence of pandemia of the covid-19 on the CRIPTO-wave markets : During the pandemic of the Government, travel limitations and locking were imposed, causing the CRIPTO currency decline.
Why is the systemic risk worrying about the crypto currency?
Crypto currencies act independently of traditional financial systems, which means that their value is not directly related to any certain property or market. However, this also means that they can be sensitive to systemic risks if the spread of the market is experiencing significant disorders.
Key risks associated with systemic risk of cryptocurrencies
- Liquinity risks : Lack of regulatory control and volatility of the market in crypto currency can lead to liquidity problems, which makes it difficult to buy or sell property.
- Regulatory uncertainty : governments and regulatory bodies are yet to fully understand the characteristics of the Crypto currency, which can create uncertainty about their future value and behavior.
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System risk relieving in cryptocurrency markets
Although the risks associated with the cryptocurrency system are significant, there are steps that can be taken to mitigate them:
- Improved Regulation : Governments and regulatory bodies need to establish clear guidelines and control mechanisms to ensure the stability of the CRIPTO currency.
- Increased transparency : Improved transparency of the CRIPTO -valute transactions and market data can help reduce uncertainty and increase trust in markets.
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Conclusion
Crypto currency has the potential to disrupt the financial world, but its decentralized nature also makes it vulnerable to systemic risks. Since the market participants are still moving in this complex landscape, understanding the impact of the system market is crucial to relieve potential risks and ensure stability.
Recognizing the risks associated with the system of cryptocurrencies and taking steps to mitigate them, we can work to create a safer and more stable financial environment for all stakeholders involved in these markets.