Market Structure Divergence

Definition ∞ Market structure divergence occurs when the observed patterns in price action contradict signals from underlying market metrics or indicators. For instance, a cryptocurrency’s price might be rising, but trading volume is declining, or the number of active addresses is falling. Such divergences suggest a weakening of the current trend and can precede a reversal. It indicates a misalignment between price performance and fundamental market activity.
Context ∞ News analysts frequently highlight market structure divergence as a warning sign for traders and investors. Reports might point out a divergence between price and on-chain liquidity, suggesting that a price rally lacks genuine buying support. Identifying these discrepancies helps market participants anticipate potential shifts in momentum and adjust their strategies accordingly. It is a critical concept for advanced technical and on-chain analysis.