What Is the Difference between Systemic Risk and Idiosyncratic Risk in Crypto?

Systemic risk is the risk of a collapse of the entire crypto market or a major segment, often due to macro events, regulatory changes, or a failure in a major protocol (e.g. a stablecoin collapse). It cannot be diversified away.

Idiosyncratic risk is asset-specific risk, such as a smart contract bug, a team dispute, or a tokenomics flaw, which can be mitigated through diversification. Beta measures an asset's exposure to systemic risk.