Definition ∞ Supply absorption failure occurs when buying demand is insufficient to counteract the selling pressure from circulating digital assets. This market condition arises when the volume of new or existing tokens being sold onto the market exceeds the capacity of buyers to acquire them. Consequently, the asset’s price typically declines as sellers reduce their asking prices to find willing purchasers. It indicates a lack of underlying demand to absorb the available supply, leading to downward price momentum.
Context ∞ Supply absorption failure is a key indicator of bearish market sentiment and is frequently observed during market corrections or bear markets. Analysts monitor metrics such as exchange netflows and order book depth to assess the balance between supply and demand. A critical aspect to watch is the emergence of strong buying interest at lower price levels, which could signal a potential market bottom and a reversal of this failure.
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