Definition ∞ 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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