Definition ∞ Investor panic describes a sudden, widespread loss of confidence among market participants, leading to rapid and indiscriminate selling of assets. This behavior is typically driven by fear and uncertainty, often triggered by adverse news, significant market downturns, or systemic shocks. During investor panic, rational decision-making may diminish, resulting in exaggerated price declines and increased market volatility. The phenomenon can affect various asset classes, including cryptocurrencies, as individuals seek to exit positions quickly.
Context ∞ Investor panic is a frequently observed event in volatile cryptocurrency markets, often discussed in news analyses of sharp price corrections. Events such as regulatory crackdowns, major exchange failures, or macroeconomic instability can precipitate such a reaction. Understanding the dynamics of investor panic helps explain sudden market crashes and the subsequent periods of recovery or further decline.
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