Definition ∞ An unrealized loss spike occurs when a significant portion of digital asset holdings experience a sharp, sudden decrease in value, placing them below their acquisition cost. This condition means investors are holding assets that are currently worth less than what they paid, but they have not yet sold them. It reflects periods of rapid price depreciation and heightened market stress, often preceding realized losses.
Context ∞ Cryptocurrency news frequently reports on unrealized loss spikes to illustrate the immediate financial impact of sharp price corrections on investors. This metric provides crucial context for understanding the psychological pressure on holders, as it can precede a wave of panic selling if prices continue to fall. Monitoring unrealized losses helps analysts gauge the potential for further market volatility and capitulation events.
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