A digital asset management application stores a mixture of original and lossy assets in a user's local storage resource. This mixture is dynamically adjusted in response to usage patterns and availability of local storage. If local storage is limited, the number of original assets stored locally is reduced. If local storage resources are critically low, lossy assets are purged. A user's interactions with his/her digital assets are monitored, and assets that are perceived to be less important to a user are purged from local storage before assets that are perceived to be more important. An asset may be deemed to be “important” based on any number of relevant criteria, such as user selection, user rating, or user interaction. Coordinating asset allocation between local and cloud-based storage resources requires little or no active management on behalf of the user, thus transparently providing the user with the benefits of cloud storage.