Asset Scarcity Models

Asset scarcity models are mathematical frameworks used to estimate the value of an asset based on its limited supply and the rate at which new units are created. These models often utilize the stock-to-flow ratio to correlate scarcity with price performance over time.

By applying these models, investors can determine if a token is likely to appreciate due to increasing scarcity or depreciate due to ongoing dilution. While these models are popular, they often overlook the role of utility and network demand, which can also drive price.

Effective scarcity models incorporate both supply-side constraints and demand-side growth to provide a more holistic view of value. They are widely used in long-term fundamental analysis of store-of-value assets.