Definition ∞ Dormancy Flow is an on-chain metric that assesses the average age of spent transaction outputs relative to the total coin supply. It indicates whether older, previously inactive coins are moving on the network. A high dormancy flow suggests that long-term holders are liquidating their positions, potentially signaling a market top. A low dormancy flow, conversely, indicates that mostly newer coins are in circulation.
Context ∞ Analysts often monitor Dormancy Flow to gain insight into the behavior of long-term holders, who typically represent a more informed segment of the market. Observing spikes in this metric can provide an early warning of potential selling pressure from these experienced participants. Conversely, a consistent low Dormancy Flow suggests that these holders are retaining their assets, which can be a supportive factor for price stability or growth.
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