Supply absorption capacity refers to the market’s ability to purchase and hold a certain volume of an asset without a significant price decline. This metric indicates the strength of buying demand relative to the available supply, reflecting how well the market can withstand selling pressure. A high absorption capacity suggests robust demand, where new supply, such as from miners or profit-takers, is readily bought by investors. Conversely, low capacity implies weak demand, leading to price drops when supply increases.
Context
Supply absorption capacity is a key analytical concept discussed in crypto news, especially when assessing the sustainability of price rallies or potential for market bottoms. Analysts examine metrics like stablecoin inflows and order book depth to gauge this capacity. Understanding this balance between supply and demand is crucial for predicting future price movements.
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