Investing in cryptocurrency can be overwhelming. Knowing all the different terms such as circulating supply, can help you make better investing decisions though.
Circulating Supply in crypto is the total number of coins that are currently available for trade and are circulating in the market and in the general public. When a new crypto is released, only a certain number of tokens go into circulation. The circulating supply is always less than the fully diluted supply.
Below is a more in-depth explanation of circulating supply and why it is important.
When a cryptocurrency is launched, not all of the tokens are launched at the same time. Generally, a set amount is launched initially, then over a period of time, the remaining tokens are mined into the blockchain.
For example, Bitcoin is mined approximately every ten minutes until it reaches its fully diluted amount of 21 million coins. Also, coins may be burned to permanently reduce the total supply in circulation.
It’s important to note that the circulating supply only refers to the total amount of coins available to the public, not the fully diluted (max supply) overall.
The circulating supply is important in crypto because once multiplied by the per-unit price, investors can better understand the approximate valuation of various cryptocurrencies, also known as the market cap. To do this, simply take the circulating supply and multiply it by the current market price of the crypto.
So, if there is a circulating supply quantity of 100,000 crypto coins and the current market value of the coin is at $5.00 each, that means the market cap is $500,000. Figuring the market cap is important because it can be used to help determine the overall risk and stability of crypto that you might be considering investing in.
Generally, a cryptocurrency with a greater market cap (greater than $10 billion) means that it is less likely to be affected by significant fluctuations in the market, hence it may be a safer bet in terms of investing.
Whereas a cryptocurrency with a lower market cap (less than $1 billion) is greatly affected by significant fluctuations, such as if a holder with a lot of tokens sold off their supply.
Ultimately, the circulating supply of crypto is an important metric to know, especially if you are considering investing in crypto.
