Definition ∞ A Cost Basis Break occurs when the current market price of an asset falls below an investor’s average purchase price for that asset. This event indicates that the investment is currently operating at an unrealized loss. For digital assets, it often signals a point where many holders are underwater on their positions. Understanding this metric is vital for evaluating portfolio performance.
Context ∞ The concept of a Cost Basis Break is frequently referenced in cryptocurrency market analysis, particularly during periods of price correction or downturns. A widespread break among market participants can suggest increased selling pressure as investors seek to minimize losses. Analysts watch this metric closely for signs of capitulation or potential support levels, impacting overall market sentiment and price action.
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