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When Scarcity Backfires: Why Popular NFTs Can Lose Value When Supply Gets Too Tight

Updated: Oct 14, 2025

When Scarcity Backfires: Why Popular NFTs Can Lose Value When Supply Gets Too Tight
Teramy Academy

Marketing leaders have long operated on a fundamental principle: scarcity drives up prices. Limited edition products, exclusive drops, countdown timers—all designed to create urgency and justify premium pricing. But NFTs are breaking this rule in ways that challenge decades of accepted wisdom.


Research analyzing over 1,100 NFT collections on OpenSea reveals a counterintuitive pattern. When NFTs generate high social buzz (measured through Twitter activity and likes), increasing scarcity can actually decrease their price. This inverts the traditional relationship between supply constraints and willingness to pay.


Why Social Value Matters More Than You Think

The key difference lies in what drives value for NFTs versus physical collectibles. Ask NFT owners what matters most when pricing physical goods versus NFTs, and you'll see a dramatic reversal. For physical collectibles, 82% cite intrinsic qualities like aesthetic appeal, functionality, or hedonic enjoyment. Only 18% point to social factors like how much others approve of the item.


For NFTs, these numbers flip. Just 19% cite intrinsic value as the primary driver, while 81% identify social value (i.e., the approval of others and opportunities for connection) as what really matters. This makes intuitive sense. Many NFTs offer minimal aesthetic appeal (artist Beeple famously called his own $69 million NFT work "crap"). Few collectors complete full sets, eliminating the satisfaction that physical collectors derive from completeness. What remains is primarily social currency.


The Social Value Threat Mechanism

This shift in value drivers creates a paradox. When an NFT collection has minimal social buzz, scarcity works as expected, signaling desirability and driving up prices. Consumers fall back on traditional heuristics: limited supply must mean high demand.


But when social signals are strong (high Twitter engagement, many likes, active Discord discussions), scarcity becomes threatening rather than enticing. The fewer NFTs available in a popular collection, the lower your chances of accessing its social value. You cannot participate in community discussions, cannot signal membership in a desirable group, cannot connect with other holders.


Think of it like a popular nightclub. If the club admits 200 people per night, you have a reasonable shot at getting in and enjoying the social scene. But if that same club only admits five people per night, not only is access nearly impossible, the very limitation undermines the social experience you're seeking. The scarcity that might make the club seem exclusive instead makes it pointlessly restrictive.


Analysis of OpenSea data confirms this pattern. When collections receive high daily tweet volume (above 1,335 tweets, compared to a median of 290), scarcity's effect on price becomes negative. The relationship holds even after controlling for tweet sentiment and visual features of the NFTs themselves.


Design Factors That Moderate the Effect

Not all NFT collections show this negative scarcity effect equally. Two design features determine how strongly social value concerns influence pricing.


First, collection structure matters. Most NFTs appear in "complementary sets" where each item shares visual similarities but maintains distinct characteristics (think Bored Ape Yacht Club, where apes share a basic template but vary in features). These designs optimize both affiliation (you're part of the club) and distinctiveness (your ape is uniquely yours). Here, scarcity threatens full social value access, driving the negative effect.


However, "replicative series" NFTs (i.e., identical copies without variation) limit social value potential from the start. You can affiliate with other holders, but cannot differentiate yourself. With less social value at stake, scarcity's negative effect disappears. Experimental data shows that for replicative series, scarcity has no significant impact on willingness to pay, while for complementary sets, high scarcity reduces prices by roughly 32%.


Second, platform design influences outcomes. Major platforms like OpenSea explicitly encourage social interaction through likes, Twitter integration, and Discord channels. Some platforms highlight influencers and high-engagement posts. In these environments, social value is salient, and scarcity's negative effect emerges clearly.


By contrast, platforms like Blur.io position themselves as "The NFT marketplace for pro traders," emphasizing pure buying and selling while suppressing social features. This approach has sparked controversy in NFT communities precisely because it downplays community values. But it also changes pricing dynamics. When platforms minimize social value emphasis, scarcity's negative effect on price attenuates.


Implications for Marketing Strategy

These findings require marketing leaders to reconsider several assumptions. First, standard scarcity tactics may backfire for products where social value dominates intrinsic value. Before implementing limited releases or constrained supply, assess whether you're threatening the very social access that drives demand.


Second, community building becomes a pricing lever, not just an engagement tactic. The strength of your NFT community directly impacts how supply constraints affect willingness to pay. Invest in platforms and features that facilitate genuine connection among holders.

Third, collection design decisions carry pricing consequences. If your NFTs offer high variation within a unified theme, you're optimizing for social value, which means scarcity requires careful management. If you're releasing identical items, traditional scarcity effects may still apply.


Fourth, platform selection matters strategically. Launching on socially oriented platforms versus transaction-focused platforms will fundamentally change how consumers respond to your supply decisions.


Beyond NFTs

While this research focuses on NFTs, the underlying principle has broader applications. Any digital good where social value outweighs intrinsic value may show similar patterns. Consider online gaming communities, digital trading platforms, or exclusive online clubs. When participation value comes primarily from community access rather than the product itself, constraining supply may reduce rather than increase perceived value.


The lesson extends beyond pricing to product design. As more consumption moves into digital spaces where social dynamics dominate functional benefits, traditional marketing principles built on scarcity and exclusivity need fundamental rethinking. The challenge is identifying when you've crossed the threshold where social value becomes focal, and adjusting strategy accordingly.


Original Article: Hofstetter, Reto, Martin P. Fritze, and Cait Lamberton. "Beyond scarcity: a social value-based lens for NFT pricing." Journal of Consumer Research 51, no. 1 (2024): 140-150. (Article Link)


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