Cryptocurrencies are different from fiat currencies, and there are certain terms you need to understand to know how they operate. When you look at cryptocurrency tables, you will notice numbers that reflect the circulating supply, the market cap, the daily and total volumes. What are these values?
What is circulating supply in crypto? How is it calculated?
The circulating supply of a cryptocurrency is the total number of coins that are available for trade and are currently circulating in the market.
When a new token is released, the number of them that go into circulation is less than the number of fully diluted supply.
The circulating supply of a cryptocurrency is a useful metric to measure the market capitalization of a company. It doesn’t consider the total supply.
When a new crypto is launched – not all tokens are released at the same time. Instead, the set number of coins is usually distributed, and the remaining ones are then taken to the blockchain.
For instance, Bitcoin takes around ten minutes to reach its full supply.
To reduce the total supply, some coins can be burned. This method of circulating supply only considers the total amount of coins that are available to the public.
What is total supply?
The total supply of a cryptocurrency is the number of coins that are available to the public on the blockchain. This includes all the tokens that are not in public circulation.
When a company launches a new token or coin, it can create plenty of additional coins than it distributes at the time of its launch.
Certain types of coins, such as those that are allocated for staking rewards, might not be able to be issued until certain conditions have been met.
These coins are known as “premine” or “un minted.” They have not hit anyone’s wallet and are unlikely to be in circulation.
These could be created following a premine, where a developer mines countless coins before the blockchain is launched, but doesn’t distribute them to the public.
However, the total supply doesn’t include the coins that have been burned. These are coins that have been sent to a wallet that doesn’t have the necessary key.
Some coins, such as Ethereum, do not have a maximum supply. Currently, there is no upper limit on the number of coins that can be produced. However, only around 18 million ETH can be minted annually.
Due to the varying nature of the supply of different cryptocurrencies, it is difficult to determine exactly how much of each asset’s supply is available to the public.
For instance, in UST, the company created and burned LUNA to maintain the price of its stablecoin, which is equal to $1. On the other hand, in Ethereum, a portion of its supply is burned to pay for transaction fees.
What can you do with this information?
Let us now learn how the circulating supply of a cryptocurrency affects its value. The number of coins that are available to the public affects the price of a particular asset. By calculating the demand and supply of a particular cryptocurrency, it can provide a more accurate picture of its overall stability.
The circulating supply is a vital metric in the cryptocurrency industry, as it allows investors to understand the multiple characteristics of a company’s market cap. That helps investors to consider their options before investing in crypto.
It can also be used to estimate the price of a particular token. Just multiply the current market price of a particular cryptocurrency by the circulating supply.
The market cap of a cryptocurrency is computed by considering the total amount of coins that are available to the public.
For instance, if there are 100,000 coins in circulation, the market cap of the cryptocurrency is $500,000.
Understanding the market cap is essential to determine the overall stability and risk of a cryptocurrency.
A company’s market cap is often considered a safer bet when compared to other investments due to its lower volatility. A larger market cap allows a company to be more stable during times of uncertainty.
A lower market cap can also be detrimental to a cryptocurrency, as it can lead to significant fluctuations. For instance, if many investors sell off their assets, the market cap of the cryptocurrency would decrease.
The circulating supply of a cryptocurrency is an important metric to consider when investing in the industry.
Conclusion
The amount of coins that are available to the public is a crucial metric to consider when it comes to investing in the cryptocurrency industry. It can affect the price of a particular asset and the multiple other factors that affect its overall stability.
Having a good understanding of the circulating supply of a cryptocurrency can help you pick the best place to invest in the market.
