Definition of Circulating Supply applied to Blockchain (2024)

FAQs

Definition of Circulating Supply applied to Blockchain? ›

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.

Circulating Supply refers to the number of coins or tokens of a specific cryptocurrency that are publicly available to buy or sell. If you can trade them, they are considered circulating.

Before investing in a cryptocurrency or crypto project, you should check the ratio between the circulating supply and the total supply. If more than 80% of the coins are in circulation, things are going downhill. Seriously consider another investment. The same applies if less than 50% of the coins are in circulation.

The Bottom Line. Total supply refers to the total number of cryptocurrency coins or tokens created. It differs from circulating supply, as it includes coins or tokens that are locked or held in reserve, and maximum supply, which is the total number that can ever be created.

After a token reaches maximum supply, the argument goes, the coin's supply becomes static - miners can no longer create new coins. The demand should continue to grow. A maximum cap, they hope, guarantees value gains.

Circulating supply affects liquidity, with higher supply ensuring easier trading and price stability. Bitcoin's high Circulating Supply results from its initial rapid mining and future scheduled halving events with the last coin to be mined by the year 2140.

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.

What Happens When Circulating Supply Reaches Max Supply? If the circulating supply and the max supply are equal, this means all coins were released in circulation.

Investor at Bitcoin (2013–present) · 6y. To 'run out of a circulation supply' of anything means that whatever unit of value we are talking about must be deflationary. Meaning, the supply is being destroyed or lost in some way, shape or form.

As outlined in the section above Circulating supply represents ICP that was ever liquid. A subset of the circulating supply is locked in neurons as staked ICP.

Why is circulating supply important? ›

Why is the circulating supply so important? Primarily, it plays a critical role in determining a cryptocurrency's market capitalization, a pivotal metric in assessing its market value. Market capitalization is computed by multiplying a cryptocurrency's current market price by its circulating supply.

Investors often look at the circulating supply to gauge a cryptocurrency's scarcity and potential for appreciation. A lower supply can suggest a higher value if demand remains strong.

Total supply is normally equal or greater than the circulating supply. Maximum Supply: It is the maximum number of coins that will ever exist for a crypto currency. There won't be any more supply once a coin reaches its max supply cap as it is the maximum amount that can ever be mined or produced.

Bitcoin, Ethereum, and Litecoin are some known examples of low supply cryptocurrencies. There are also smaller and less familiar projects, with limited supplies.

The End of Bitcoin Mining Rewards

However, once the maximum supply of 21 million bitcoins is reached, these block rewards will cease​​. Miners will then solely rely on transaction fees as their compensation for validating transactions and securing the network​​.

Total supply refers to the total number of cryptocurrency coins or tokens created. It differs from circulating supply, as it includes coins or tokens that are locked or held in reserve, and maximum supply, which is the total number that can ever be created.

Circulating Supply

The more coins that exist, the greater the demand must be for the price to rise. If the token (a share) is in short supply and in high demand, its price will likely increase. Conversely, if demand for a cryptocurrency is low but supply is high, its price may decline.