What Is a ‘Flight to Quality’ and How Does It Affect Crypto Derivatives?
A 'flight to quality' is a financial market phenomenon where investors rapidly shift their capital from perceived risky assets to safer investments during a period of market turmoil. Following a security breach in a PoA network, capital would likely flee the affected cryptocurrency and its derivatives.
This would cause the price of the affected asset to crash, while potentially increasing the value of derivatives tied to more established, secure assets.
Glossar
Flight to Quality
Market Behavior ⎊ Flight to Quality describes a market phenomenon where investors, facing heightened uncertainty or systemic risk within the broader cryptocurrency ecosystem, rapidly liquidate riskier, lower-cap altcoins and derivatives positions to accumulate assets perceived as having superior stability and liquidity, most commonly Bitcoin or stablecoins.
Safer Investments
Asset ⎊ Financial instruments or digital currencies characterized by lower volatility profiles and established track records of capital preservation, often serving as a flight-to-quality destination during market stress.