Market Liquidity Rotation

Definition ∞ Market Liquidity Rotation describes the phenomenon where capital systematically shifts between different digital assets or distinct market sectors within the cryptocurrency ecosystem. This movement indicates evolving investor preferences and changing risk appetites. It reflects a reallocation of funds based on perceived opportunities or risks.
Context ∞ Market liquidity rotation is a key observation in cryptocurrency markets, as it often signals a shift in focus from one asset class to another, such as from Bitcoin to alternative coins, or from large-capitalization to smaller-capitalization assets. Understanding these rotations helps participants identify emerging trends and potential opportunities or risks. This dynamic influences portfolio adjustments.