Circulating Supply Meaning:
Circulating supply refers to the total amount of a cryptocurrency that is currently available for trading in the market.
What Is Circulating Supply
Circulating supply is a key metric in the crypto market that represents the number of coins or tokens that are currently available for trading. It excludes coins that are locked, reserved, or not yet mined. This metric is crucial for investors and traders as it helps gauge the availability of the cryptocurrency in the market, impacting its price and market capitalization. The concept is similar to the supply metrics found in traditional finance, but it carries unique implications within the crypto ecosystem.
The circulating supply can fluctuate due to various factors, such as new coins being mined or minted, coins being burned, or changes in market dynamics. Understanding circulating supply helps investors assess the potential for price changes and the overall scarcity of a cryptocurrency, which can be a significant determinant of its value.
Circulating Supply vs Total Supply vs Max Supply. How Are They Different?
- Circulating supply is the number of coins currently available on the market for trading and transactions. It excludes locked, staked, or reserved tokens.
- Total supply of a cryptocurrency refers to the total number of existing coins or tokens, including those that are locked or staked. It includes circulating supply.
- Max supply is the absolute limit of how many coins can ever be created. Some cryptocurrencies have no max supply.
How is Circulating Supply calculated?
Circulating supply is calculated by taking the total supply of a cryptocurrency and subtracting any coins that are not available to the public: this includes coins that are held by founders, reserved for future release, those locked in smart contracts, etc. It also does not include burned or removed from circulation, as total supply excludes them by definition.
The circulating supply formula can be summarized as:
Circulating Supply = Total Supply - (Reserved Coins + Locked Coins)This metric is essential as it directly influences the market capitalization of the cryptocurrency, which is calculated as:
Market Capitalization = Circulating Supply × Current PriceTherefore, as the circulating supply changes, it can significantly affect the market perception and valuation of the cryptocurrency.
