Definition ∞ Cost Basis Failure refers to a market situation where the price of a digital asset drops below the average acquisition cost for a significant portion of its holders. This event signifies that a substantial number of investors are holding their assets at an unrealized loss. It often triggers increased selling pressure as holders capitulate to avoid further losses. Such a failure typically indicates a breakdown of previous support levels and a weakening of market structure.
Context ∞ News reports often highlight Cost Basis Failure as a signal of severe market weakness and potential further price declines. Analysts frequently examine these events to identify points of maximum financial stress among holders, which can precede periods of capitulation or, conversely, eventual market bottoms. Recognizing this condition is important for assessing the depth of a market correction and investor sentiment.
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