How Does a Token Burn Mechanism Affect the Valuation of a Simple Utility Token?

A token burn mechanism reduces the total supply of a utility token, creating scarcity. If the demand for the token's utility remains constant or increases, the reduced supply leads to an increase in the price per token, thus increasing its market capitalization.

This deflationary mechanism is a direct value accrual method, often factored into valuation models as a way to decrease effective velocity or increase the value of the 'M' (money supply) component in MV=PQ.