Clear DefinitionsSupply Shock
1 min read
Pronunciation
[suh-ply shok]
Analogy
Supply shock is like a sudden oil glut or embargo that drastically shifts prices in energy markets.
Definition
A sudden change in token supply—through minting, burning, or unlocking—that can significantly impact price and market dynamics.
Key Points Intro
Supply shocks affect token economics via:
Key Points
Mint events: Large token issuances from treasury or vesting unlocks.
Burn events: Protocol burns or buybacks reduce circulating supply.
Unbonding completions: Mass unbonding releases tokens back to market.
Airdrops & rewards: Distribution campaigns inflate supply temporarily.
Example
Technical Deep Dive
Track supply shock via on‑chain events: `Transfer` from zero address (mint) and to zero address (burn). Analytics dashboards compute delta in circulating supply per epoch. Price impact models incorporate supply elasticity and order book depth to simulate shock scenarios.
Security Warning
Unanticipated unlocks can catch investors off‑guard; projects must communicate vesting schedules transparently.
Caveat
Market absorption capacity varies; even planned shocks can have outsized effects if liquidity is low.
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