Token Supply Squeeze

Definition ∞ A Token Supply Squeeze occurs when the available circulating supply of a digital asset becomes severely limited relative to persistent buying demand. This imbalance can lead to rapid and substantial price increases as buyers compete for scarce tokens. It is often driven by factors such as large-scale staking, token burns, or significant accumulation by major holders. Such a squeeze indicates strong underlying demand exceeding current market availability.
Context ∞ The current discussion surrounding a Token Supply Squeeze is a frequent subject of market analysis, particularly for assets with deflationary mechanisms or high staking participation rates. A key debate involves distinguishing between genuine supply constraints and temporary market illiquidity. A critical future development entails more precise on-chain analytics to track real-time circulating supply and locked tokens. News reports often highlight potential supply squeezes as catalysts for price appreciation, influencing investor sentiment and trading decisions.