Sector Rotation

Definition ∞ Sector Rotation in the digital asset market refers to the strategic reallocation of capital by investors from one cryptocurrency sector or narrative to another. For example, funds might move from decentralized finance (DeFi) tokens to non-fungible tokens (NFTs), or from large-cap assets to emerging altcoins. This movement is driven by changing market trends, technological advancements, or shifting investor sentiment regarding which areas offer the best growth prospects. It reflects an active investment strategy.
Context ∞ Crypto news often highlights sector rotation as a key dynamic influencing which digital asset categories are gaining or losing momentum. Observing these capital shifts can provide insights into prevailing market narratives and where investor attention is concentrated. Understanding sector rotation is important for anticipating which segments of the digital asset market may experience future growth or contraction.