Definition ∞ Fixed supply economics describes an economic system where the total quantity of an asset is predetermined and cannot increase. This economic model is a core characteristic of many cryptocurrencies, such as Bitcoin, where a hard cap on the total number of units ensures inherent scarcity. This scarcity is designed to prevent inflation caused by oversupply and potentially preserve or increase the asset’s value over time. It contrasts sharply with traditional fiat currencies, which can be printed without strict limits.
Context ∞ Fixed supply economics is a central concept in the scarcity-driven discussion surrounding Bitcoin and its role as a potential inflation hedge or store of value. Events like Bitcoin halvings, which reduce the rate of new supply creation, frequently influence market sentiment and price predictions. The long-term implications of this economic model for global finance remain a subject of considerable debate and observation.
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