Definition ∞ Supply rotation refers to the movement of cryptocurrency assets from one group of holders to another, often indicating a shift in market sentiment or investment strategy. This typically involves long-term holders selling to new market entrants or short-term speculators. Observing supply rotation helps analysts understand who is accumulating or distributing assets at different price levels. It can signal either a healthy transfer of wealth or a warning of potential market exhaustion.
Context ∞ Supply rotation is a key concept in on-chain analysis, frequently cited in market reports to interpret investor behavior and predict future price trends. News often discusses whether coins are moving from strong hands to weak hands, or vice versa, providing insight into the conviction of different investor cohorts. This metric helps in understanding the underlying dynamics of asset distribution.
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