Definition ∞ Downside Risk Builds describes a market condition where the potential for an asset’s price to decrease significantly increases. This typically occurs due to deteriorating market sentiment, negative economic indicators, or adverse regulatory developments. As downside risk builds, investors perceive a higher probability of future losses, often leading to increased selling pressure or reduced buying interest. It indicates a weakening market outlook.
Context ∞ In the volatile cryptocurrency markets, news frequently reports on indicators that suggest downside risk builds, such as increasing regulatory uncertainty, macroeconomic headwinds, or significant outflows from digital asset products. This situation often precedes price corrections or sustained bearish trends, prompting market participants to assess their risk exposure and adjust their strategies. Monitoring these signals is crucial for understanding potential shifts in digital asset valuations.
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