Definition ∞ Crypto Deleveraging is the process by which market participants reduce their debt exposure within the cryptocurrency ecosystem. This often occurs during periods of market stress, where falling asset prices trigger margin calls and forced liquidations. Deleveraging can lead to significant sell-offs as entities unwind their borrowed positions.
Context ∞ Crypto deleveraging events are significant news items, frequently highlighting vulnerabilities in the digital asset market. They often follow rapid price declines or the failure of major platforms, impacting liquidity and market stability. Regulators and analysts closely monitor deleveraging cycles to assess systemic risk and advocate for more robust risk management practices.
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