This article analyzes the complexity of supply and demand relationships in the cryptocurrency market, emphasizing the multidimensional characteristics of demand and its driving factors, including market participants, emotional marketing, and macroeconomic factors.
Author: Andrey Didovskiy
Translation: Baihua Blockchain
There is a universally applicable economic law that governs all markets: supply and demand. This also applies in the cryptocurrency field, where the supply of cryptocurrencies is extremely abundant. Alternative tokens, non-fungible tokens, stablecoins, governance tokens, meme coins, proof of work, proof of stake… every day, a large number of new tokens emerge, with a wide variety.
To better understand, there were about 10,000 crypto assets in 2017. By February 2025, this number has exceeded 11.5 million, and this growth seems to be accelerating. When supply exceeds demand, market attention becomes dispersed, liquidity becomes uneven, leading to a thin order book, and prices become unusually sensitive to selling pressure, triggering severe downward volatility (often irreversible).
When demand exceeds supply and is sustained, we see the emergence of Bitcoin. Through a well-designed economic model, reasonable consideration of supply dynamics, combined with powerful and concise technology, these align closely with social philosophy, fostering a loyal community and driving the liquidity flywheel effect, continuously creating real demand that ultimately converges on real assets.
There is no magic. The only factor that can distinguish quality and ultimately determine success is demand, without a doubt. What appears to be simple demand is actually a multidimensional principle, containing layers of interdependence and subtle differences. In other words, there are levels to it.
1. Demand Domino Effect
Demand typically flows evenly across various assets based on the fundamental elements of a project, product, or economy.
There are two basic types of demand: direct demand and indirect demand.
Direct demand refers to demand originating from a niche area. For example, wanting to use a certain application generates demand for that application's token, which further translates into demand for the network it relies on, ultimately leading to demand for that network's token.
Indirect demand is driven by macro factors, such as currency printing, interest rates, government policies, and political systems.
These two types of demand are interdependent. For instance, monetary policy can affect the amount of capital freely flowing in society, thereby determining the public's risk appetite, which in turn influences which assets attract capital inflows. Conversely, if high-risk assets begin to rise without fundamental capital changes, it indicates that mature investors in the market expect capital to soon flow into the hands of ordinary retail investors, who are positioning themselves in advance.
For cryptocurrencies, the fundamental driving force of demand comes from two basic human motivations: the pursuit of pleasure and the avoidance of pain, both driven by stories and narratives.
The mainstream narrative behind these two motivations is "sovereignty"—that is, protecting oneself from government intervention or resisting government control.
The narrative of pursuing pleasure includes things like Lamborghinis, Rolexes, luxury travel, attracting the attention of others, and gaining recognition from family and friends. This reflects people's desire to be right and profit from it, a behavior we call "gambling."
The narrative of avoiding pain refers to the fear of missing out (FOMO). Seeing others make life-changing money through investments can trigger emotions of not wanting to be seen as a fool or left behind. We call this behavior "yielding" (i.e., losing oneself and hastily liquidating a portfolio).
2. Who Drives Demand?
To understand how to drive demand, we first need to clarify the sources of demand. Since demand is typically measured through buying and selling pressure and liquidity, the key question in identifying the source of demand is: Who is driving it?
For simplicity, we can categorize "who" into three main groups:
1) Builders
This group includes individual developers who independently create tools, companies that build products capable of generating real revenue, hackers who find system vulnerabilities, creators who disseminate information through content, small teams building decentralized exchanges (DEX) and bridging protocols, and, of course, developers of various smart contracts.
2) Retail Investors
This group constitutes the vast majority of the market, including responders and KOLs on crypto Twitter, meme coin investors, NFT enthusiasts, speculative apes, and "100x investors" doubling down. These individuals are often referred to as "backpackers" or "exit liquidity." They are those who seek higher returns through speculation, escape conventional frameworks, and integrate into the community.
3) Institutions
This group includes companies that incorporate cryptocurrencies into their asset allocation, enterprises deploying tokenized debt instruments, and governments turning volcanoes into Bitcoin mining farms.
Here, we omit a large number of intermediary roles, such as market makers, trading platforms, node infrastructure, and cloud service providers.
3. Factors Influencing Demand
So, how is demand in cryptocurrency driven? Clearly, by propping up a meme coin with internal liquidity, gaining endorsements from influential figures, and using "community" bots to flood comments…
Just kidding, in reality, the demand driving in cryptocurrency is not much different from other fields; the core is marketing.
We do not intend to delve into the ethical issues of marketing, but it is essential to point out that marketing is essentially about achieving goals by influencing emotions.
To cater to human nature, marketing methods can be summarized into two types: Attraction and Coercion.
Attraction is about organically building excellent products and communities, gradually establishing trust. This takes a long time but can lead to lasting impacts, ultimately forming a self-driven, sustainable super system.
Coercion, on the other hand, involves creating the illusion that something is more valuable than it actually is through improper means. These methods, while low-cost and short-lived, can be highly destructive, with the most typical examples found in the stories of meme coins in Argentina and many from Pump.fun.
Regardless of which marketing method drives demand, the key lies in the characteristics of the demand itself; here we discuss various factors that measure demand adoption.
1) Measuring Demand
The most common and often erroneous way to measure demand is through price. A slightly better way is to measure it through liquidity. Liquidity is the cornerstone of financial markets and the most crucial indicator when assessing the economic health of an asset or asset class. In other words, liquidity represents buying pressure (the desire to own) and selling pressure (the reluctance to let go).
When the price of a cryptocurrency rises, it creates a strong psychological loop in people's minds, making them feel that this cryptocurrency must be valuable, thus turning into a self-fulfilling prophecy of price growth. Conversely, when prices fall, people often assume that the project has no demand anymore.
While this phenomenon has its rationale, it does not comprehensively reflect the actual situation.
As a technology-first, pseudo-economic innovation, the demand for cryptocurrencies is far more complex than we imagine, involving multiple dimensions of finance and technology. Here is an incomplete list:
- MAU (Monthly Active Users)
- DAU (Daily Active Users)
- Total number of on-chain addresses
- Total number of smart contracts
- Total number of transactions
- Total number of developers
- Hash rate
- Number of miners
- Total amount of staked tokens
- Number of nodes
- On-chain transaction volume
- TVL (Total Value Locked) This list is extensive, and there are many ways to interpret this data. Currently, the challenge remains: how to discern how much of this demand is genuinely organic and combine it with other driving factors to truly understand the state of a project.
2) Behind Demand
Regardless of what ultimately drives demand, the most important question remains "why." While it can sometimes be difficult to ignore external noise, giving yourself the opportunity to explore from within and deeply consider the underlying logical reasons is crucial.
- Why do I want to buy this?
- Why do others think it has value?
- Why would someone want to sell it?
- Why would someone want to own it?
- Why do some believe others will want it?
- Why would a project choose to build on this network?
- Why not choose other networks?
It is understandable that this path is not easy, especially when it can be challenging to escape one's biases and avoid falling into the repetitive reasoning of "analysis paralysis"—a cycle of constantly questioning oneself that ultimately leads to decision-making dilemmas.
But it is essential to understand that when you can control your impulses and delve into the "why" questions without emotion, you will ultimately make wise decisions.
Waking up early is not always the best, and it's not about right or wrong; what matters in the end is success; and the key to success lies in being willing to accept possible mistakes for profit.
Link to the article: https://www.hellobtc.com/kp/du/02/5687.html
Source: https://medium.com/the-crypto-masters-guide-tcmg/dimensions-of-demand-in-crypto-105b66b13e4b
免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。
