In both cryptocurrency and traditional financial markets, circulating supply is a fundamental concept referring to the total amount of a specific cryptocurrency or asset currently available for trading. Understanding circulating supply is essential for evaluating a cryptocurrency’s market value, scarcity, and investment potential.
Definition of Circulating Supply
Circulating Supply represents the total quantity of a cryptocurrency that is publicly tradable in the market. Unlike total supply or max supply, it excludes locked, reserved, or burned tokens.
Role and Importance of Circulating Supply
Market Valuation
Circulating supply multiplied by the current price determines a cryptocurrency’s market capitalization (market cap), a key metric for assessing its value:
Market Cap = Circulating Supply × Current Price
Scarcity Assessment
A lower circulating supply often indicates higher scarcity, which can drive up demand and value.
Price Impact
Sudden increases in circulating supply (e.g., unlocked tokens entering the market) may lead to price volatility.
Circulating Supply vs. Total Supply vs. Max Supply
| Metric | Description | Example |
|---|---|---|
| Circulating Supply | Currently tradable tokens (excludes locked/burned tokens). | 19M BTC (2024) |
| Total Supply | All existing tokens (includes burned tokens, excludes future minting). | ETH’s total minted supply |
| Max Supply | Maximum tokens that will ever exist (some projects have no cap). | Bitcoin’s 21M cap |
How Circulating Supply Is Calculated
Projects or third-party platforms (e.g., CoinMarketCap, CoinGecko) track circulating supply by accounting for:
- Tradable tokens: Freely available on exchanges.
- Lock-up schedules: Tokens reserved for teams/investors with vesting periods.
- Burn mechanisms: Permanent removal of tokens from supply (e.g., Binance’s quarterly burns).
Real-World Examples
Bitcoin (BTC)
- Circulating Supply: ~19M BTC (2024)
- Max Supply: 21M BTC
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Ethereum (ETH)
- Circulating Supply: No fixed max; increases annually via new ETH issuance.
- Total Supply: All ETH minted to date.
Key Takeaways
- Circulating supply directly influences market cap and scarcity.
- Compare it with total and max supply for holistic analysis.
- Monitor unlock schedules/burns to anticipate price changes.
FAQs
1. Why does circulating supply matter?
It reflects actual market liquidity and helps investors gauge scarcity and valuation.
2. Can circulating supply decrease?
Yes, through token burns (e.g., SHIB’s burn initiatives) or permanent locking.
3. How does staking affect circulating supply?
Staked tokens are often excluded from circulating supply until unstaked.
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4. Where can I check a coin’s circulating supply?
Use platforms like CoinGecko or CoinMarketCap for real-time data.
5. What happens when max supply is reached?
No new tokens are minted (e.g., Bitcoin miners will rely solely on transaction fees post-21M).
6. Do all cryptocurrencies have a max supply?
No—Ethereum and Dogecoin have inflationary supplies without a hard cap.