When Empty Shelves Create Full Panic
June 23, 2025
Picture the grocery store in March 2020. Empty toilet paper aisles. Bare shelves where bread used to sit. Suddenly, everyone needed everything, right now, because it might not be there tomorrow. The scarcity wasn’t real—supply chains were functioning—but the fear was. And fear, once it takes hold, creates its own reality.
Markets work the same way. Scarcity sells, even when it’s selling fear. The moment investors believe assets are disappearing—whether it’s the last Bitcoin under $30K or the final GameStop share before the “squeeze”—rational thinking gets trampled by the stampede. What role does scarcity bias play in market panics? It’s the accelerant that turns small fires into infernos.
Scarcity bias doesn’t just make us want what we can’t have. It makes us panic about losing what we think we need. In markets, this psychological trigger transforms normal selling into capitulation, regular corrections into crashes, and temporary illiquidity into perceived extinction events.
The Psychology of Running Out
Scarcity bias is hardwired. It kept our ancestors alive when food was genuinely scarce and shelter truly limited. But in modern markets, this ancient survival mechanism becomes a wealth destroyer. When investors perceive that something valuable is becoming scarce—whether it’s shares, liquidity, or even time itself—the brain’s alarm system overrides its analytical capacity.
Here’s where it gets dangerous: perceived scarcity often has nothing to do with actual scarcity. During the 2008 financial crisis, investors weren’t running out of investment opportunities. They were running out of confidence. The scarcity was psychological, not mathematical. But the panic was real, and the selling was relentless.
The mechanism works in reverse too. When assets feel abundant—when everyone’s getting rich, when IPOs are minting millionaires, when your neighbor’s crypto portfolio is worth more than your house—scarcity bias goes dormant. We assume the good times will last forever because they feel infinite. Until they don’t.
How Scarcity Bias Amplifies Market Crashes
Market panics aren’t usually about fundamentals. They’re about liquidity, confidence, and time. Scarcity bias takes each of these elements and weaponizes them against rational decision-making.
Consider liquidity first. When selling pressure builds, buyers disappear. Not because there’s no value, but because there’s no time to think. Scarcity bias convinces investors that if they don’t sell now, they won’t be able to sell at all. The rush to the exits becomes self-reinforcing. Each wave of selling makes the next wave feel more urgent.
Then there’s the confidence drain. Markets crash when they run out of believers. Scarcity bias makes every piece of bad news feel like the last straw. Every margin call feels like the final warning. Every headline feels like proof that opportunity is vanishing. The fear isn’t just about losing money—it’s about being left behind, about missing the last chance to escape.
Time scarcity is the cruelest trick of all. Panic creates artificial urgency. Investors who might take weeks to research a stock will dump it in minutes during a crash, convinced that waiting another hour could mean losing everything. The scarcity of time—real or imagined—short-circuits long-term thinking.
Case Studies in Scarcity-Driven Panic
The meme stock craze of 2021 was scarcity bias in reverse. Retail investors piled into GameStop and AMC not because of fundamentals, but because of perceived scarcity. “The squeeze is coming,” they said. “Get in before it’s too late.” The fear wasn’t about missing profits—it was about missing history.
When the bubble burst, scarcity bias flipped. Suddenly, everyone needed to exit, right now, before the “diamond hands” turned to dust. The same psychological trigger that drove the buying frenzy powered the selling panic.
Crypto provides an even clearer example. Bitcoin’s fixed supply—only 21 million coins will ever exist—makes scarcity part of its fundamental appeal. But during crypto winters, this same scarcity works in reverse. If Bitcoin is crashing and there are only 21 million coins, then maybe those coins aren’t worth what we thought. Maybe scarcity without utility is just artificial limitation.
The 2022 crypto collapse wasn’t about running out of Bitcoin. It was about running out of reasons to hold Bitcoin. Scarcity bias made the selling feel urgent: better to get out now, before liquidity disappears entirely.
The Contrarian Response: Abundance in Disguise
Here’s what seasoned investors know: market panics create abundance, not scarcity. When everyone is selling, everything becomes available. When fear dominates, opportunities multiply. The trick is recognizing that scarcity bias is lying to you.
During the March 2020 crash, Apple shares fell 30% in a month. The company didn’t become 30% less valuable. iPhones didn’t become 30% less useful. But scarcity bias convinced millions of investors that they needed to sell immediately, before things got worse. Those who recognized the bias saw abundance where others saw scarcity.
The contrarian approach isn’t about being a hero or catching falling knives. It’s about understanding that when scarcity bias is screaming “Get out now!”, the real scarcity might be patience, not opportunity. Markets crash when they run out of time horizons, not when they run out of value.
This doesn’t mean every crash is a buying opportunity. Sometimes scarcity is real. Sometimes companies actually are running out of money, customers, or relevance. The skill is distinguishing between psychological scarcity and fundamental scarcity. One creates opportunities; the other creates bankruptcies.
Practical Defense Against Scarcity-Driven Decisions
The first defense is recognition. When you feel the urge to buy or sell immediately—when waiting feels dangerous, when delay feels costly—ask yourself what scarcity you’re actually facing. Is the opportunity really disappearing, or does it just feel that way?
Build buffers. Scarcity bias thrives on tight margins and short deadlines. If you’re always fully invested, always leveraged, always operating on thin time horizons, you’re vulnerable. Cash isn’t just dry powder for opportunities; it’s psychological insulation against scarcity-driven panic.
Question the urgency. Most investment decisions that feel urgent aren’t. Most opportunities that feel scarce aren’t. Most deadlines that feel absolute aren’t. The market will be there tomorrow. The company will still exist next week. Your portfolio won’t disappear if you sleep on a decision.
Study abundance, not scarcity. During market stress, focus on what’s becoming more available, not what’s becoming less available. When everyone is selling, what’s becoming cheaper? When panic dominates headlines, what opportunities are being ignored? Scarcity bias makes us hunt for the exits. Abundance thinking makes us hunt for entrances.
The Real Scarcity: Clear Thinking
Market panics don’t happen because assets become scarce. They happen because clear thinking becomes scarce. Rationality gets hoarded. Patience gets rationed. Long-term perspective goes on back order.
Scarcity bias exploits this shortage of mental clarity. It convinces us that action is always better than inaction, that speed matters more than accuracy, that fear is more reliable than analysis. But in markets, the scarcest resource isn’t opportunity—it’s the ability to think independently when everyone else is following the herd.
The next time panic grips the markets, remember the empty store shelves of March 2020. The toilet paper shortage wasn’t real until everyone believed it was real. Market scarcity works the same way. Most of the time, what feels scarce is actually abundant. What feels urgent is actually patient. What feels like the last chance is actually one of many chances.
Stop hunting scarcity. Start hunting clarity. The opportunities are there. They’re just disguised as problems that everyone else is trying to escape.
