Definition ∞ Asset price elasticity measures how much an asset’s price changes in response to a shift in a related factor. This metric quantifies the sensitivity of a digital asset’s market value to external variables such as supply changes, demand fluctuations, regulatory announcements, or broader macroeconomic conditions. It provides insight into the asset’s volatility and its susceptibility to market events, distinguishing between highly reactive and more stable digital currencies or tokens.
Context ∞ Understanding asset price elasticity is vital for assessing risk and opportunity in digital asset markets, especially when news reports discuss market reactions to policy shifts or technological upgrades. Analysts frequently examine this characteristic to predict how different cryptocurrencies might react to significant industry developments or external economic pressures. The concept helps explain why some digital assets exhibit extreme price movements while others maintain relative stability.
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