Definition ∞ A market cleanout describes a sharp, significant price decline in an asset or market segment, often accompanied by a rapid reduction in speculative positions and excessive leverage. This event typically liquidates overextended traders and removes weak hands from the market. It results in a resetting of market dynamics, often establishing a more sustainable price floor. Such events are frequently observed in volatile markets like cryptocurrency.
Context ∞ Market cleanouts are often discussed in cryptocurrency news as a necessary, albeit painful, process that can precede a healthier, more sustained market recovery. They are frequently triggered by adverse news, regulatory actions, or macroeconomic shifts, leading to forced selling. While disruptive in the short term, these events can contribute to a more robust market structure by removing speculative froth and establishing a more fundamental valuation for digital assets.
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