Definition ∞ A risk appetite decrease signifies a reduction in an investor’s or market’s willingness to undertake financial risk, often in response to adverse economic conditions, market volatility, or geopolitical events. This shift typically leads to a preference for safer, less volatile assets and a withdrawal from higher-risk investments, such as many cryptocurrencies. It reflects a cautious stance, where capital preservation becomes a greater priority than seeking aggressive returns. This change in sentiment influences asset allocation decisions.
Context ∞ News reports often attribute cryptocurrency market downturns or stagnation to a broader risk appetite decrease among investors. Factors like rising interest rates, inflation concerns, or global economic instability can cause this shift, leading to capital flowing out of digital assets. Understanding a decrease in risk appetite provides crucial context for interpreting market trends and anticipating periods of reduced liquidity or price pressure in the crypto space.
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