Definition ∞ A market overheat signal is an indicator suggesting that asset prices have risen too quickly and unsustainably, potentially leading to a market correction. This signal often correlates with excessive speculative activity and heightened investor euphoria. It alerts participants to increased risk of a sharp price reversal. Such conditions warrant caution among market observers.
Context ∞ Market overheat signals are regularly analyzed in cryptocurrency news to help investors assess market stability. Discussions frequently reference metrics like funding rates, derivatives open interest, and social sentiment to identify periods of extreme optimism. The interpretation of these signals is vital for managing exposure in volatile digital asset markets.
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