Definition ∞ Supply shock absorption describes the market’s capacity to readily take in and neutralize a sudden increase in the available supply of a cryptocurrency without a significant negative impact on its price. This occurs when there is sufficient underlying demand or buying interest to quickly purchase the newly available tokens. Effective absorption indicates a robust market with strong support levels, preventing sharp price declines. It reflects market strength and liquidity.
Context ∞ Supply shock absorption is a critical concept in crypto news, particularly when discussing events like token unlocks, large institutional sales, or exchange inflows. Analysts frequently assess the market’s ability to absorb these supply increases as an indicator of its underlying health and demand. The current discussion often revolves around whether new market participants or existing holders are strong enough to consistently absorb large quantities of incoming supply without causing price instability.
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