Realized loss occurs when a digital asset is sold for a price lower than its original purchase price, thereby converting an unrealized loss into an actual financial deficit. This event is recorded on the blockchain as a transfer of coins at a price below their last movement price. Significant aggregate realized losses indicate periods of high selling pressure and investor capitulation, particularly during market downturns.
Context
Cryptocurrency news frequently reports on realized losses, especially during bear markets, to quantify the financial impact on investors and gauge market sentiment. A spike in realized losses often signals a phase of intense selling by participants exiting positions at a deficit. This metric provides crucial context for understanding market bottoms, as it indicates a clearing of weak hands and a potential precursor to recovery.
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