Definition ∞ Risk appetite decline describes a market condition where investors become less willing to take on higher-risk assets, opting instead for safer or more stable investments. This shift in sentiment typically occurs during periods of economic uncertainty, heightened volatility, or adverse market events. It often results in capital flowing out of speculative markets.
Context ∞ A risk appetite decline in traditional financial markets can significantly impact digital asset valuations, as cryptocurrencies are often perceived as higher-risk investments. During such periods, capital tends to move away from assets like Bitcoin and altcoins, leading to price corrections. Understanding this macroeconomic trend is crucial for anticipating broad market movements within the crypto sector.
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