Supply Exhaustion Risk

Definition ∞ Supply exhaustion risk is the potential scenario in a financial market where the available supply of an asset for sale at current price levels becomes critically low, making it difficult for buyers to acquire large quantities without significantly driving up the price. This risk indicates that sellers are reluctant to part with their holdings, suggesting strong conviction or scarcity. It often precedes periods of rapid price appreciation. Such a condition can lead to sharp upward price movements.
Context ∞ Cryptocurrency news often highlights supply exhaustion risk as a bullish indicator, particularly for assets with strong fundamentals. Analysts monitor on-chain metrics related to exchange reserves and long-term holder behavior to identify this condition. Understanding this risk helps in anticipating potential price surges due to limited selling interest.