Definition ∞ A liquidity cluster describes a concentrated area within a market where a substantial volume of buy or sell orders is placed at or around a specific price level. These clusters often signify points of strong support or resistance, indicating where market participants anticipate a significant price reaction. They represent areas of heightened trading interest and potential price inflection points. Identifying these clusters is a key component of technical analysis strategies.
Context ∞ In cryptocurrency markets, identifying liquidity clusters on order books or through on-chain analysis can provide valuable insights into potential price movements and market participant behavior. News and analytical reports often refer to these zones as critical levels for digital assets, suggesting where large institutional or “whale” orders may be positioned. Understanding these clusters assists traders and analysts in gauging market sentiment and predicting short-term price dynamics for various digital assets.
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