Market Clearing

Market Clearing is the process by which a market reaches an equilibrium price where the quantity of an asset supplied equals the quantity demanded. At this price point, all orders are filled, and there is no remaining excess demand or supply.

In traditional finance, this is often achieved through periodic auctions or continuous matching in a limit order book. In the cryptocurrency space, protocols use automated mechanisms to ensure that trades settle and liquidity remains balanced.

If a market does not clear, it indicates an imbalance that requires price adjustment to attract more buyers or sellers. Effective market clearing is essential for price discovery and ensuring that markets remain functional.

It represents the point of efficiency where the market settles into a stable state.