Exchange Supply Shock

Definition ∞ An exchange supply shock occurs when the available supply of a cryptocurrency on centralized exchanges experiences a sudden and significant reduction. This event often results from large withdrawals by investors moving assets to cold storage or decentralized finance platforms. A decrease in exchange supply can indicate strong holder conviction and potentially signal upward price pressure.
Context ∞ Crypto news frequently reports on exchange supply shocks as a key indicator of market sentiment and potential price action. A sharp decline in exchange reserves suggests that fewer assets are available for immediate sale, which can lead to increased scarcity. This metric is closely watched by analysts seeking to predict future price movements for various digital assets.