Definition ∞ A supply scarcity signal indicates a reduction in the available circulating supply of a digital asset, suggesting increasing demand relative to its availability. This signal can arise from various factors, such as increased asset locking in staking protocols, burning mechanisms, or long-term holder accumulation. A strong scarcity signal often precedes upward price pressure. It suggests a potential supply shock.
Context ∞ Analysts and investors closely monitor supply scarcity signals to predict potential price appreciation for digital assets. News reports often highlight on-chain metrics related to circulating supply, such as exchange reserves or staking ratios. Understanding these signals is crucial for assessing an asset’s fundamental value and future price potential.
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