Supply Floor Formation

Definition ∞ Supply Floor Formation describes the establishment of a price level below which a digital asset’s value appears unlikely to fall significantly due to strong buying interest or accumulation. This phenomenon often indicates that a substantial portion of the circulating supply is being held by investors with high conviction. It suggests a potential support zone where demand consistently outweighs selling pressure. This formation is frequently observed through on-chain analysis.
Context ∞ Supply Floor Formation is a key concept in on-chain market analysis, frequently highlighted in crypto news to explain periods of price stability or accumulation. Analysts examine metrics like realized price or cost basis of various holder cohorts to identify these strong support levels. The presence of a clear supply floor can signal a healthy market structure and a precursor to future price appreciation.