Definition ∞ Unrealized losses refer to the deficit in value of an asset held by an investor, compared to its original purchase price, that has not yet been realized through a sale. In cryptocurrency markets, this occurs when the current market price of a digital asset drops below the price at which it was acquired, but the asset remains in the investor’s wallet. These losses are theoretical until the asset is sold, at which point they become realized losses. High levels of unrealized losses across the market can indicate significant investor stress and potential capitulation.
Context ∞ Unrealized losses are a frequently discussed on-chain metric in crypto news, particularly during bear markets, as they provide insight into investor sentiment and potential selling pressure. Analysts monitor the total supply of Bitcoin or other assets held in unrealized loss to gauge market bottoms and potential recovery phases. Understanding this metric helps to assess the psychological state of the market and anticipate future price action.
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