Definition ∞ A circulating supply shock occurs when there is a sudden and significant decrease in the available quantity of a cryptocurrency within the open market. This phenomenon can be triggered by various events, such as large-scale token lock-ups for staking, protocol-mandated token burns, or unexpected increases in demand that outpace new supply. Such a reduction in availability can significantly alter market dynamics.
Context ∞ Analysts closely monitor circulating supply shocks as potential indicators of future price movements for digital assets. When fewer tokens are available for trade, and demand remains constant or rises, upward price pressure often results. Understanding these events is vital for comprehending market reports and asset valuation in the crypto economy.
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