Definition ∞ Capitulation risk describes the potential for investors to sell their digital assets in large volumes during a market downturn. This selling pressure often results from widespread fear or despair, leading to significant price declines. Such events indicate a loss of confidence among market participants, who liquidate positions regardless of previous investment strategies. This phenomenon typically marks the final phase of a bear market, preceding a potential recovery.
Context ∞ Understanding capitulation risk is crucial for assessing market sentiment and potential bottom formations in cryptocurrency news. Analysts frequently monitor on-chain metrics and trading volumes for signs of extensive selling, which could signal a market reset. The discussion often revolves around identifying these exhaustion points, providing insight into possible market reversals or continued price depreciation depending on the asset’s underlying fundamentals.
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