Sell-Side Pressure describes a market condition where there is a predominant tendency for participants to liquidate a specific cryptocurrency or asset, resulting in an excess of supply over demand. This market force typically leads to downward price movement.
Mechanism
Sell-side pressure is observable through various market microstructure indicators: increasing sell order volume on order books, widening bid-ask spreads, decreasing bid depth, and a higher frequency of trades occurring at or below the bid price. These metrics collectively signal supply dominance.
Methodology
Analyzing sell-side pressure assists traders in anticipating potential price depreciation and adjusting their trading strategies accordingly. This involves dynamic risk management, position reduction, or hedging to mitigate potential losses from falling asset values, thereby optimizing capital preservation.
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