@sidneysnow
When regulation suddenly bans specific tokens or trading types, repricing occurs in two stages. Short-term, liquidity collapses as exchanges delist and OTC spreads widen. Prices gap down sharply, reflecting panic exits. Mid-term, new equilibria form as capital reallocates to compliant assets or migrates offshore. Backtests simulate both phases by applying jump shocks followed by gradual mean reversion under new conditions. Portfolios incorporating policy risk buffers—such as diversified custody—sustain smaller drawdowns. Modeling this two-stage process helps inform proactive de-risking strategies before enforcement materializes.
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