🔥Deflation Mechanics & Floor Stability

In most NFT ecosystems, royalties exit the system — value flows outward. In SquareStrategy, those same royalties circulate internally, reducing supply and supporting demand in an endless feedback loop.

Deflation here isn’t symbolic — it’s measurable, visible, and permanent.

♻️ 1. The Dual-Pressure Model

SquareStrategy applies two forces simultaneously:

Force
Action
Result

Buy Pressure

Accumulation Pool purchases floor NFTs

Floor price support

Sell Pressure Reduction

Burn removes Strategy NFTs from circulation

Permanent scarcity

These two mechanics operate together, ensuring that each trade tightens supply while reinforcing price stability.

🔁 2. Feedback Flow Diagram

Figure 4.3 — Deflationary Feedback Loop Every market trade reinforces the next by raising floor stability and reducing supply — a closed feedback economy.

📉 3. Deflation Curve Example

A sample projection of Strategy NFT supply over time (simulated burn rate under moderate volume):

Supply
│\
│ \
│  \
│   \
│    \       •
│     \   •
│      ••  
│_______•________________  Time

Each dot represents a verified burn event. Scarcity grows not by speculation, but by deterministic design.

🧮 4. Market Dynamics

  • Floor Buys → Constant liquidity absorption.

    • Removes cheap supply from open markets.

    • Reduces volatility around the floor level.

  • Burn Events → Supply compression.

    • Makes every remaining NFT proportionally more valuable.

    • Demonstrates on-chain proof of scarcity.

Together, they form an asymmetric market model — liquidity enters faster than supply can regenerate.

⚖️ 5. The Self-Stabilizing Mechanism

Market Condition
System Behavior
Result

High Volume

More buys, faster burns

Scarcity accelerates

Low Volume

Accumulation dominates

Liquidity preserved

Price Drop

Pool intervenes at floor

Stabilization

Price Spike

Relist profit realized

Controlled equilibrium

No external governance, no human intervention — the system simply reacts to volume inputs.

It doesn’t “peg” the floor; it softens volatility by injecting buy pressure at the bottom and removing float from the top.

🧠 6. Psychological Layer

Deflation is not only an economic phenomenon — it’s a psychological one.

  • Visible burns are signals of progress.

  • Fewer available NFTs amplify perceived value.

  • Constant floor activity encourages secondary trading.

These elements turn the ecosystem into a trust machine — holders see action, not promises.

💹 7. Comparative Market Chart

Price ↑
│                 ╭───╮
│                ╭╯   ╰╮
│   Normal NFT  ╱      ╲╮
│         ╭────╯        ╰──────
│  SquareStrategy  ────╮  ╭─────
│                     ╰──╯
└─────────────────────────────→ Time

Figure 4.4 — Price Behavior Comparison Traditional collections oscillate violently around hype cycles. SquareStrategy collections self-correct toward stability, creating a more sustainable market path.

🌍 8. Economic Takeaways

  • Deflation is visible, not theoretical.

  • Liquidity never leaks, it circulates internally.

  • Floor support is structural, not psychological.

  • Each trade tightens the market, ensuring long-term health.

SquareStrategy transforms volatility into value — a system where each market move reduces entropy instead of creating it.

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