Asset Participation Ratio

The Asset Participation Ratio is a metric that quantifies the percentage of assets within a specific index or ecosystem that are actively moving in line with the primary trend. It is used to determine if a move is organic or if it is being driven by a small group of outliers.

In crypto, this ratio helps traders assess the validity of a rally in a specific sector, such as DeFi or Layer 1 protocols. A high ratio indicates a healthy, widespread move, while a low ratio suggests that the trend is weak and likely to fail.

It acts as a filter to prevent traders from chasing false breakouts. By tracking this ratio, one can gain insight into the dispersion of capital across the market.