Definition ∞ Currency risk represents the potential for financial loss due to fluctuations in the exchange rate between different monetary units. This risk extends to the volatility between fiat currencies and digital assets, or between various digital assets themselves. It arises when an asset or liability is denominated in a currency other than an investor’s base currency, leading to changes in value when converted.
Context ∞ This concept holds significant weight in international cryptocurrency transactions, stablecoin peg stability, and the overall valuation of digital asset portfolios. News frequently reports on how global macroeconomic shifts, central bank policies, or regulatory actions influence these exchange rate dynamics, impacting the perceived value and stability of digital holdings.
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