This phenomenon – known as pro-cyclicality – can for example be linked to the time-varying risk parameters for the calculation of capital requirements or the accounting framework. The need to address this excessive pro-cyclicality is a concern now shared by policy-makers globally.
A decade ago, Bitcoin was heralded as a new kind of digital money that would serve as a store of value, means of exchange, and unit of account delinked from any sovereign currencies without the need for centralized governance.