Supply Squeeze Narrative

Definition ∞ A supply squeeze narrative describes a market expectation or story suggesting that the available supply of a particular digital asset is diminishing, leading to an anticipated sharp increase in its price. This narrative often arises from observations of increasing long-term holding, reduced exchange balances, or significant institutional accumulation. It posits that as demand remains constant or rises, the restricted supply will exert upward pressure on valuation. This market sentiment can influence investor behavior.
Context ∞ The supply squeeze narrative is a recurring theme in crypto news and market commentary, particularly during bull markets or periods of significant institutional interest. Analysts frequently cite on-chain data, such as Bitcoin leaving exchanges or increasing illiquid supply, to support this outlook. While it can influence short-term market dynamics, the actual impact depends on sustained demand and broader market conditions. Understanding this narrative helps interpret market sentiment and potential price catalysts.