Definition ∞ Investor profit realization refers to the act of selling a digital asset to convert accumulated gains into a stable currency or another asset. This occurs when holders decide to liquidate their positions after a period of price appreciation, securing the unrealized profits they have accrued. It typically involves moving assets from personal wallets to exchanges for sale, or directly exchanging them for stablecoins. While a natural part of market cycles, widespread profit realization can introduce selling pressure and potentially lead to price pullbacks.
Context ∞ Profit realization is a constant factor in market analysis, particularly after significant price rallies. On-chain metrics, such as realized profit/loss ratios and spent output profit ratio (SOPR), are used to track this behavior across different investor cohorts. A critical aspect to watch is the scale and timing of profit realization, as it can indicate market tops or healthy corrections.
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