Tightening Liquid Supply

Definition ∞ Tightening liquid supply describes a market condition where the amount of readily available digital assets for immediate trading decreases. This reduction can result from increased long-term holding, assets being locked in staking or decentralized finance protocols, or reduced selling pressure. A diminishing liquid supply often precedes upward price movements due to increased scarcity.
Context ∞ Analysts frequently point to tightening liquid supply as a key indicator of potential price appreciation in cryptocurrency markets. News reports often examine on-chain metrics to identify periods of reduced liquid supply and its implications for market dynamics. This trend suggests a shift in investor behavior towards accumulation rather than distribution.