Definition ∞ A Deleveraging Wave describes a period where market participants collectively reduce their debt exposure, often in response to increased market volatility or tightening credit conditions. This process typically involves selling assets to repay loans, which can accelerate price declines and reduce market liquidity. In the crypto sector, it often follows periods of excessive speculation and can lead to significant price corrections across various digital assets. Such events highlight systemic risk within highly interconnected markets.
Context ∞ The digital asset market has experienced several deleveraging waves, notably during periods of extreme price drops or failures of major lending platforms. These events underscore the interconnectedness of leveraged positions and the potential for rapid contagion. Market participants and regulators now pay closer attention to the transparency of lending protocols and the overall health of credit markets in digital assets to mitigate future shocks.
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