Can a Deflationary Asset Still Lose Value?
Yes, a deflationary asset can still lose value if the demand for the asset decreases faster than its supply is reduced. While scarcity is a factor in value, market price is ultimately determined by the balance of supply and demand.
External factors, regulatory changes, or loss of utility can all cause a drop in demand.
Glossar
Loss of Utility
Implication ⎊ Loss of utility signifies a material decline in the functional usefulness or transactional demand for a cryptocurrency or its underlying network services.
Market Sentiment
Narrative ⎊ Within cryptocurrency markets, options trading, and financial derivatives, narrative represents the prevailing story shaping investor expectations and asset valuations.
Deflationary Asset
Scarcity ⎊ A deflationary asset, within cryptocurrency and derivatives markets, exhibits a diminishing supply schedule, often through mechanisms like token burns or halving events, directly influencing its potential value appreciation.