Definition ∞ Market Liquidity Exhaustion describes a state where the available buying or selling pressure for an asset has been largely depleted, leading to a lack of participants willing to trade at current price levels. This condition results in significantly reduced trading volume and potentially sharp price movements in response to even small orders. It indicates a market that has run out of steam in a particular direction. Such exhaustion often precedes a reversal.
Context ∞ Identifying market liquidity exhaustion is a key aspect of technical analysis in cryptocurrency markets. Traders look for declining volume during prolonged price trends as a signal of this condition. Understanding when liquidity is exhausted can help predict potential market turning points and shifts in price direction.
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