Definition ∞ Scarcity factor denotes the limited supply of a digital asset, which can influence its perceived value and price dynamics. This inherent characteristic is often hard-coded into a cryptocurrency’s protocol, such as Bitcoin’s fixed supply limit. A high scarcity factor can contribute to an asset’s appeal as a store of value. It creates a deflationary pressure, contrasting with inflationary fiat currencies.
Context ∞ The scarcity factor is a fundamental concept in the valuation discussions surrounding many cryptocurrencies, particularly those designed with capped supplies. Debates often address whether artificial scarcity alone justifies high valuations without corresponding utility or adoption. Future developments may involve new tokenomics models that introduce dynamic scarcity mechanisms or explore alternative value accrual methods beyond fixed supply limits.
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