Definition ∞ A loss realization event occurs when an asset is sold or otherwise disposed of at a price lower than its original acquisition cost, resulting in an actualized financial loss. This contrasts with an unrealized or paper loss, which exists only while the asset is still held. The event formally records the negative difference between the purchase price and the selling price. It carries direct implications for tax liabilities and accounting records.
Context ∞ In crypto markets, a loss realization event frequently accompanies significant price declines, where holders sell their digital assets to mitigate further depreciation. On-chain analytics often track the volume of assets moved at a loss, providing insights into periods of market capitulation or extreme bearish sentiment. News reports may reference these events to assess the extent of investor distress and identify potential market bottoms, indicating a phase where less confident participants exit the market.
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