Conviction Divergence

Definition ∞ Conviction Divergence describes a market state where distinct groups of participants hold contrasting views or confidence levels regarding a digital asset’s future price. For instance, long-term holders might maintain strong belief in appreciation, while short-term traders show decreasing confidence. This disparity in sentiment can lead to conflicting trading strategies and market behaviors. It reflects a lack of consensus among investors about an asset’s underlying value.
Context ∞ News often reports on conviction divergence when market indicators show a split between various investor cohorts, such as retail versus institutional participants. This divergence can precede periods of heightened volatility as differing perspectives contend for market dominance. Understanding these conflicting viewpoints is important for interpreting market signals and anticipating potential price movements or consolidation phases.