Definition ∞ Supply Distribution Risk refers to the potential for market instability or price manipulation arising from the concentrated ownership of an asset. When a small number of entities hold a large proportion of the total supply, their actions can significantly influence market prices. This risk is particularly relevant in markets with limited liquidity, where large holders can exert disproportionate influence. It highlights vulnerability to concentrated ownership.
Context ∞ For many digital assets, especially newer or smaller cryptocurrencies, supply distribution risk is a critical concern often discussed in crypto news. Highly concentrated ownership, sometimes by early investors or project teams, means that large selling events by these holders can cause drastic price drops. Market analysts monitor on-chain data to assess supply distribution risk, as it provides insight into potential volatility and the resilience of a cryptoasset against significant sell-offs.
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