New Supply Absorption describes the rate at which newly generated or unlocked digital assets are purchased and held by market participants, thereby being removed from immediate selling pressure. This metric indicates the market’s capacity to take on fresh supply without experiencing significant price depreciation. High absorption rates suggest strong demand and confidence, whereas low absorption can signal an oversupply relative to buyer interest. It is a crucial indicator of market health and asset demand.
Context
New Supply Absorption is a frequently cited concept in cryptocurrency market analysis, particularly after events like token unlocks, initial coin offerings, or Bitcoin halvings. A high absorption rate is often interpreted as a bullish signal, indicating robust underlying demand for the asset. Conversely, a low absorption rate can precede price declines, suggesting that the market is struggling to accommodate the additional supply.
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