MacroBeginner#Sentiment#Market Cycles
Risk-On / Risk-Off
R
Definition
A market paradigm where investors either flock to high-yield risk assets (Risk-On) or seek safety in cash/gold/bonds (Risk-Off).
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Concept Diagram
Key Takeaways
1
Risk-On: investors seek higher returns in volatile assets like crypto, stocks, and emerging markets.
2
Risk-Off: investors flee to safe havens like USD, gold, and treasuries — crypto typically sells off.
3
The DXY, VIX, and bond yields are the primary indicators for determining the current risk regime.
4
Understanding the risk regime is essential — the same trading strategy can work or fail depending on the environment.
Practical Example
The Fed announces emergency rate cuts due to a banking crisis. Markets shift to Risk-Off: DXY spikes, S&P drops 5%, BTC falls 15% in 48 hours as capital flees to cash and short-term treasuries.
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Related Terms
Strategy
DXY (US Dollar Index)An index measuring the value of the US Dollar against a basket of world currencies. In crypto, it inversely correlates with BTC.
Strategy
BTC DominanceThe percentage of the total crypto market cap accounted for by Bitcoin, used to identify 'Altcoin Seasons'.
Macro
M2 Money SupplyA measure of the money supply that includes cash, checking deposits, and easily convertible 'near money' like savings and money market funds.
Strategy
Bear MarketA sustained period of falling asset prices, typically characterized by negative investor sentiment and high volatility.
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