Definition ∞ Asset dilution occurs when the circulating supply of a digital asset increases, reducing the proportional ownership value of existing holders. This typically results from the issuance of new tokens or shares without a corresponding increase in the underlying asset’s total value. It effectively spreads the market capitalization over a larger number of units. The effect can diminish the value of each individual unit held.
Context ∞ Discussions around asset dilution frequently appear in cryptocurrency news, particularly concerning tokenomics, initial coin offerings, and venture capital funding rounds. Investors closely monitor token release schedules and vesting periods to assess potential future dilution and its impact on price. This concept is critical for evaluating the long-term viability and investment prospects of various digital assets. News reports often analyze dilution events in relation to project funding and market sentiment.
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