Circulating Supply
When you’re doing your own research on a cryptocurrency to invest in, an important metric to consider is the coin’s circulating supply. After all, this will govern the price action since markets are all dependent on two things: supply and demand.
Simply put, circulating supply is the number of cryptocurrency coins that are public and trading on the open market.
Keep in mind that the circulating supply of a cryptocurrency can also fluctuate, increasing or decreasing over time.
Bitcoin is a good example since it’s total supply is 21 million bitcoins — and that will never change. But all those coins aren’t available right now.
Instead, Bitcoin’s supply will gradually increase until the total supply of 21 million coins is reached. Such a gradual increase is thanks to the mining that generates new coins every 10 minutes.
However, there are other cryptocurrencies where their circulating supply also fluctuates because of coin burn events, permanently removing coins from the market.
Also keep in mind that the circulating supply refers to the coins that are accessible to the public and there may be some coins held by the founders or locked away until a certain date or condition is met. This happens most often with coins that are premined (created in full before being released).
The circulating supply of a cryptocurrency is therefore what’s used for calculating its market capitalization. It’s a simple calculation when multiplying the current market price with the number of coins in circulation. By example, if the circulating supply is 1,000,000 coins, and they’re being traded at $5.00 each, the market cap would be equal to $5,000,000.
Keep this in mind if you’re trading or doing research, and always remember to dig deeper and find out if there are any coins that are locked up and not part of the calculation — and if/when they’ll be released.