Volatility Sensitivity

Definition ∞ Volatility Sensitivity refers to the degree to which a digital asset’s price reacts to market changes, exhibiting large fluctuations in response to news, trading activity, or macroeconomic shifts. Assets with high volatility sensitivity experience rapid and significant price swings, both upward and downward. This characteristic is often present in newer or smaller market cap assets, but can also affect major cryptocurrencies during periods of uncertainty. It reflects the asset’s susceptibility to external influences and speculative trading.
Context ∞ Crypto news often discusses Volatility Sensitivity in the context of risk management and investment strategy. High sensitivity can present opportunities for rapid gains but also significant losses, a frequent topic in market analysis. Understanding an asset’s volatility sensitivity is crucial for investors seeking to manage risk exposure and for traders planning entry and exit points.