Crypto deflation, in the context of tokenomics, means a reduction in the total supply of an asset. This can occur when the number of units destroyed or removed from circulation exceeds the number of new units issued.

One common mechanism is token burning. The deflationary effect depends on the relationship between issuance and destruction.

Net supply change

If a protocol issues one million new units and burns 1.2 million units, net supply falls by 200,000 units. Gross issuance still exists, but the final change in supply is negative.

A deflationary mechanism does not automatically imply a higher market price. Price depends on both supply and demand as well as other market factors.