Scarcity Is Only One Part Of The Equation

in LeoFinance17 days ago

Hey Jesscarcity

Tokenomics has brought forth new ideas of how we measure wealth and distribute value worldwide via the internet. Bitcoin is the first with its 21 million hard cap, and many of us who believe in the coin stand behind its scarcity as the reason it's increasing in value. I do agree that having a limited supply does help in driving up the value of an asset, but it's only one part of the equation.

If 21 million were some magical number, then, in theory, Bitcoin Cash (BCH) and Bitcoin Satoshis vision (BSV) would be close to the value of Bitcoin, but it's not.

This is the reason why all tokens aren't created equal, even if they do have a similar supply or a distribution curve. You have to factor in demand too.

Demand comes from branding, trust, utility, integration, on-ramps and off-ramps, network effects, adoption curves, and this is where many other digital assets fall flat.


Quality of demand

Even if you have demand on on-ramps, there is a distinct difference between the quality of demand. If you've only got speculators demanding your token, you're going to see more volatility. If you have larger whales holding your coin, you could see more stability, but you could also see massive drawdowns overnight.

Demand also depends on the market you're going after; if you're token is meant for a niche community like the gaming community or vegan community, it will be a lot smaller in market cap versus something more general like Bitcoin.

There is no right or wrong way to drive demand, but networks require utility if they survive. Bitcoin is going after the TAM of money and provides utility in the form of a store of value and moving a bearer asset.

Scarcity being bastardised

As people desperately do not want to fall behind due to the debasement of money, we're seeing scarcity being the speculative play. Scarcity in stocks, scarcity in collectables, scarcity in crypto, especially in NFT's have seen people bid up prices of anything that can retain its value better than fiat.

Not all scarcity has value; my autograph is scarce. Does it have value? Probably not.

This is a concept that many will have to learn the hard way as they overpay for things like real estate, collectables, alt coins and stocks. When assets move up at a price, it's easy to think it can only move up, and you're going to sell it to the greater fool.

No buyer goes into a deal thinking they are going to be the patsy at the table.

Have your say

What do you good people of HIVE think?

So have at it, my Jessies! If you don't have something to comment, "I am a Jessie."

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I don't understand the market sometimes and its tough to watch in from the sidelines with all the FOMO. I feel like I could of make quite a few bucks if I jumped in buying packs with everyone else but I didn't see value in them.

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I stick to my Bitcoin there’s too much noise in this alt and digital asset market for me to pay attention to it

I bought the dip today on Bitcoin and I’m happy about it

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The bulls have their work cut off for them right now. Its starting to build some bearish signals so I think it might be due for a correction.

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I'd like to hold BTC in my own wallet, not in some ETF based on Futures Market derivation of yet-to-be-mined BTC, even PayPal BTC or buy BTC on Robinhood.

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Sadly normies don’t want to take responsibility they love paying 3rd parties a profitable fee to do shit for them like a bunch of babies! I’d say only 10% will hold BTC themselves the rest will all be custodial shit and rehypothicated Bitcoin

I can’t wait to see the first fund Bleo up because they thought they can only have paper Bitcoin. Claims and someone comes to redeem and they shit the bed as they need to buy off the market

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That's right. Scarcity is only one part of the equation. It helps but it isn't the be all and end all.

Yeah I’m so over this patch job of token burns, token burns are okay but it’s focusing on fixing a problem that’s spreading liquidity which people don’t understabr! Until more people hold your asset it doesn’t have liquidity or demand

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I was able to sell an NFT a pretty decent price the other day. I got most of my money out before the pull back happened. I had to take care of some bills otherwise I probably would have left more of it in crypto. I was talking to my family and one of the biggest things they couldn't believe was that someone actually paid what they did for the item. They must have felt it was just that scarce!

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It’s a strange market Thays still finding its feet since these tokens are one of a kind and so illiquid it really is a value in the eye of the beholder more than market forces!

I still can’t understand it so I stay away from this NFT stuff

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I get that. I am pretty heavily invested in it.

thank you for the interesting article about bitcoin,have a good day

Thanks, glad you found it interesting but if you don’t provide contextual comments people are going to keep downvoting your

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I love to read and learn from your articles,and it is still difficult for me to talk about cryptocurrencies, so I say thank you for your articles,they are very informative