Definition ∞ Single market risk pertains to the vulnerabilities or negative consequences that arise from an over-reliance on a single market for trading, liquidity, or regulatory compliance. In the context of digital assets, this could mean a disproportionate dependence on one cryptocurrency exchange, one geographic region’s regulatory framework, or one specific trading pair. Such concentration can lead to heightened exposure to localized price volatility, regulatory changes, or operational failures. Diversification is often a strategy to mitigate this risk.
Context ∞ Crypto news often reports on single market risk when analyzing the impact of regulatory actions in a major jurisdiction or the collapse of a prominent exchange. For instance, if a large portion of a digital asset’s trading volume occurs on one platform, that asset becomes highly susceptible to issues affecting that platform. Discussions frequently advise investors and projects to consider global distribution and multiple liquidity sources to reduce this concentrated exposure.
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