Definition ∞ Market supply tightening describes a reduction in the available quantity of a specific asset within a market. This condition occurs when the rate of new asset creation slows, or existing assets are removed from circulation and held by participants. A tightening supply often contributes to upward price pressure if demand remains constant or increases. It reflects a shift in the supply-demand balance.
Context ∞ Market supply tightening is a critical observation for analysts in the digital asset sector, as it can precede periods of significant price appreciation. Factors contributing to this include asset halving events, staking mechanisms, or long-term holding by investors. Monitoring on-chain data related to circulating supply and exchange reserves helps assess the extent of supply tightening.
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