Definition ∞ Market risk skew refers to an imbalance in the distribution of potential outcomes for an asset’s price, often indicating a greater perceived probability of downward movements compared to upward ones. This statistical measure reflects investor sentiment regarding extreme price changes, particularly in options markets. A negative skew suggests that investors are willing to pay more for protection against significant price drops. It provides insight into the market’s assessment of tail risks.
Context ∞ In digital asset markets, observing market risk skew can offer valuable insights into investor anxiety and potential vulnerabilities, especially during periods of heightened volatility. Discussions often relate skew to macroeconomic uncertainty, regulatory concerns, or specific protocol risks within the crypto space. Monitoring this metric helps traders and analysts gauge the likelihood of large price corrections and adjust their risk management strategies accordingly.
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