Market Drawdown

Definition ∞ Market Drawdown refers to the peak-to-trough decline in the value of an investment, portfolio, or market index over a specific period. It measures the magnitude of a price drop from its highest point before a recovery begins. Drawdowns are a common metric for assessing investment risk and volatility, indicating the maximum loss an investor might experience from a previous high. This concept is particularly relevant in the volatile digital asset markets.
Context ∞ In crypto news, Market Drawdown is frequently analyzed to assess the resilience of digital assets and the overall health of the cryptocurrency market. Reports often discuss historical drawdowns to contextualize current price corrections and predict potential recovery timelines. Understanding market drawdowns helps investors gauge risk exposure and adjust their strategies during periods of significant price contraction.