The article discusses the significance of supply and demand in the cryptocurrency market, particularly highlighting the recent proliferation of crypto assets. It explains how an imbalance—where supply outpaces demand—leads to liquidity issues and price instability. The piece underscores that successful cryptocurrencies, like Bitcoin, thrive when demand is stable and consistently maintained over time. It posits that demand is a complex concept with both direct and indirect aspects, essential to creating a loyal community around a crypto asset and ensuring its lasting value in a saturated market.
Demand tends to move uniformly throughout assets in relation to the most fundamental primitives associated with a project/product/economy. There are two types of demand primitives: direct and indirect.
When supply outpaces demand, attention gets diverted, and liquidity gets spread unevenly, making for thin order books, causing prices to experience extreme sensitivity to selling pressure.
By coupling careful economic design that takes proper consideration of supply dynamics with powerful, maximally simple technology that is philosophically aligned with society, a loyal community is bred.
The single factor that separates quality assets and ultimately dictates success is demand, which is actually a multi-dimensional principle with layers of dependencies.
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