ASRI: An Aggregated Systemic Risk Index for Cryptocurrency Markets

TL;DR

This paper introduces ASRI, a comprehensive systemic risk index for cryptocurrency markets, validated through historical crises and outperforming traditional measures in detecting and classifying systemic risks.

Contribution

The paper presents the novel ASRI index, integrating multiple risk factors specific to crypto markets, with validation showing improved detection accuracy and specificity over existing methods.

Findings

ASRI detects all four historical crises with significant lead time.

Out-of-sample testing shows zero false positives in 2024-2025.

ASRI captures crypto-specific vulnerabilities beyond traditional systemic risk measures.

Abstract

We introduce the Aggregated Systemic Risk Index (ASRI), comprising four weighted sub-indices: Stablecoin Concentration Risk (30%), DeFi Liquidity Risk (25%), Contagion Risk (25%), and Regulatory Opacity Risk (20%). Using data from DeFi Llama, Federal Reserve FRED, and on-chain analytics, we validate against four historical crises (Terra/Luna, Celsius/3AC, FTX, SVB). Event study analysis detects significant abnormal signals for all four (t-statistics 5.47-32.64, p < 0.01), with threshold-based detection achieving 30-day average lead time for three of four events. Walk-forward validation confirms 4/4 out-of-sample detection (18-day average lead), ruling out look-ahead bias. A three-regime HMM identifies distinct risk states with >97% persistence; structural stability tests pass (Chow p = 0.993). Benchmarking against Diebold-Yilmaz connectedness shows equivalent detection (75%) with higher precision (33.5% vs. 22.4%). Out-of-sample specificity testing on 2024-2025 data confirms zero false positives, correctly classifying the $1.5B Bybit hack as non-systemic. ASRI captures DeFi-specific vulnerabilities -- composability risk, flash loan exposure, and tokenized RWA linkages -- that SRISK and CoVaR cannot accommodate.