Definition ∞ Momentum exhaustion describes a condition where the driving force behind a price trend begins to diminish, signaling a potential slowdown or reversal. This occurs when buying or selling pressure weakens, leading to smaller price movements and reduced trading volume in the direction of the trend. It indicates that the prevailing market participants are losing their influence, making the asset vulnerable to a change in direction. Technical indicators frequently identify this state.
Context ∞ The identification of momentum exhaustion is a common analytical theme in crypto market reports, suggesting that a rally or decline may be nearing its end. Discussions often focus on the specific indicators that confirm this state and the likelihood of a subsequent price correction or consolidation. A critical future development involves the refinement of predictive models that can more accurately forecast market turning points following periods of exhaustion. This concept offers valuable insight for timing market entries and exits.
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