Supply Squeeze Potential describes a market condition where a significant reduction in the available supply of an asset, combined with sustained or increasing demand, could lead to a rapid price increase. This situation often arises when a large portion of the asset is held by long-term investors or locked in various protocols. Identifying supply squeeze potential helps traders and investors anticipate periods of heightened price volatility. It is a key indicator of market dynamics.
Context
In the cryptocurrency market, Supply Squeeze Potential is a frequently discussed concept, particularly for assets with limited circulating supplies or those extensively used in decentralized finance applications. Analysts often examine on-chain metrics like exchange reserves and staking rates to gauge this potential. A critical future development involves more sophisticated models that can accurately quantify the various factors contributing to an asset’s effective circulating supply, providing clearer signals for market participants.
The vast majority of Bitcoin's capital base is now concentrated in high-value wallets, confirming institutional dominance and structural supply strength.
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