Definition ∞ Risk-sensitive markets are financial environments where asset prices and trading activity are highly responsive to perceived levels of uncertainty, regulatory changes, or potential adverse events. In the context of digital assets, these markets often exhibit significant volatility in response to news, security incidents, or shifts in investor sentiment. Participants in such markets prioritize risk assessment and mitigation.
Context ∞ Cryptocurrency markets are frequently described as risk-sensitive due to their nascent nature, regulatory ambiguity, and inherent price fluctuations. News often highlights how events like protocol exploits, exchange hacks, or macroeconomic indicators can trigger sharp price movements. Understanding the dynamics of risk-sensitive markets is crucial for making informed decisions within the digital asset space.
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