Definition ∞ Liquidity overhang describes a market condition where a substantial amount of capital is available and waiting to be deployed into assets. This situation often arises after periods of market consolidation or downturns, when investors accumulate cash or stablecoins. It represents latent buying power that could significantly influence asset prices if activated. A large liquidity overhang can signal potential for future market rallies.
Context ∞ In cryptocurrency markets, a liquidity overhang can indicate a readiness among investors to re-enter positions following a price correction or a period of uncertainty. News analyses often point to rising stablecoin market capitalization or low trading volumes as evidence of this condition. This metric provides insight into potential market rebounds and the collective willingness of participants to acquire assets.
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