Community Submission - Author: Paolo Facchinetti
The term circulating supply refers to the number of cryptocurrency coins or tokens that are publicly available and circulating in the market.
The circulating supply of a cryptocurrency can increase or decrease over time. For example, the circulating supply of Bitcoin will gradually increase until the max supply of 21 million coins is reached. Such a gradual increase is related to the process of mining that generates new coins every 10 minutes, on average. Alternatively, coin burn events like the ones performed by Binance, cause a decrease in the circulating supply, permanently removing coins from the market.
The circulating supply refers to the coins that are accessible to the public and should not be confused with the total supply or max supply. The total supply is used to quantify the number of coins in existence, i.e., the number of coins that were already issued minus the coins that were burned. The total supply is basically the sum of the circulating supply and the coins that are locked up in escrow. On the other hand, the max supply quantifies the maximum amount of coins that will ever exist, including the coins that will be mined or made available in the future.
Moreover, the circulating supply of a cryptocurrency can be used for calculating its market capitalization, which is generated by multiplying the current market price with the number of coins in circulation. So if a certain cryptocurrency has a circulating supply of 1,000,000 coins, which are being traded at $5.00 each, the market cap would be equal to $5,000,000.
FAQs
If the circulating supply is equal to the maximum supply, this means that the entire quantity of cryptocurrencies has been released. The price of the relevant cryptocurrency may gain or lose value depending on market conditions. As an example, the circulating supply and maximum supply of Litecoin (LTC) is 84 million.
Why circulating supply is less than total supply? ›
While circulating supply states the coins that are currently accessible to the public; on the other hand total supply is used to quantify the number of coins that is in existence. If we look into max supply, this helps in quantifying the maximum amount of coins that can ever exist for a crypto asset.
Can circulating supply be more than max supply? ›
The circulating supply is always a percentage of the total supply – the higher the percentage, the better. For example, Bitcoin has a circulating supply of 19 million, which is about 90% of the maximum supply of 21 million.
Why is circulating supply higher than total supply? ›
The circulating supply refers to the coins that are accessible to the public and should not be confused with the total supply or max supply. The total supply is used to quantify the number of coins in existence, i.e., the number of coins that were already issued minus the coins that were burned.
Can circulating supply increase? ›
Circulating supply is the total number of a specific cryptocurrency's coins or tokens in circulation on a blockchain and publicly available for the market to trade. The amount in circulation can rise or fall over time as new coins are mined or burned.
Can the max supply increase crypto? ›
Types of Maximum Supply in Crypto
It is a predetermined number of coins that can never be increased or decreased, regardless of demand.
What happens when circulating supply is low? ›
Circulating supply is the supply in the law of supply and demand. If it is high and demand is low, prices of respective coins will depreciate. If supply is low and demand is high, then the coin prices will appreciate raising the value of the coins.
Which crypto has infinite supply? ›
If we talk about Ethereum cryptocurrency, then it has an infinite supply of coins which is seen as an example, today, the number of these coins in circulation is 120,000,000.
What does circulating supply tell you? ›
Circulating Supply is the total number of coins or tokens that are actively available for trade and are being used in the market and in general public.
What does high circulating supply mean? ›
Circulating Supply is the total number of coins or tokens that are actively available for trade and are being used in the market and in general public. When a company creates a particular number of tokens, only a portion of it instead of the whole supply is made available for circulation.
When a cryptocurrency hits its maximum supply, it means that no more coins will be created. This can have a number of effects on the cryptocurrency, including: The price of the cryptocurrency may increase. This is because there will be a limited number of coins available, which could drive up demand.
