Capital Adequacy Metrics

Capital adequacy metrics are quantitative standards that determine the minimum amount of capital a platform must hold to remain stable. These metrics ensure that the exchange has enough resources to withstand unexpected losses or market downturns.

They take into account the total volume, leverage, and volatility of the assets being traded. Regulators often impose these standards to protect users and ensure the orderly functioning of financial markets.

For decentralized protocols, these metrics are often coded into the smart contracts to ensure self-sufficiency. They are the bedrock of trust for any financial system, digital or traditional.