Profit taking exhaustion describes a market condition where selling pressure from investors realizing gains diminishes significantly. This indicates that most participants who intended to sell at current price levels have already done so. This reduction in selling volume often precedes a potential reversal or continuation of an upward price trend.
Context
Analysts use on-chain metrics, such as Spent Output Profit Ratio (SOPR) or coin dormancy, to identify signs of profit taking exhaustion in digital asset markets. When these indicators suggest selling pressure is waning, it can signal that a local price bottom is near or that an asset is poised for further appreciation. This concept is crucial for understanding market cycle dynamics.
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