What is a Circulating Supply?
The meaning of circulating supply in cryptocurrency refers to the quantity of coins or tokens currently in circulation and available to the public. It is the total number of coins or tokens that are issued and available for trade, minus any that have been burned or destroyed.
In the world of cryptocurrency, the circulating supply is an important metric used to determine the market capitalization of a particular cryptocurrency. Market capitalization is calculated by multiplying the current price of a cryptocurrency by its circulating supply, which provides a snapshot of the total value of the cryptocurrency.
The circulating supply of a cryptocurrency can change over time as new coins or tokens are issued through mining, airdrops, or other methods, or as existing coins or tokens are burned or destroyed. It is important to note that the circulating supply of a cryptocurrency is different from its total supply, which includes all coins or tokens that have been issued.
The circulating supply of a cryptocurrency can have an impact on its price and market value. Cryptocurrencies with a larger circulating supply may have a lower price per coin or token, as there are more coins or tokens in circulation. On the other hand, cryptocurrencies with a smaller circulating supply may have a higher price per coin or token, as there are fewer coins or tokens in circulation.
It is also worth noting that the circulating supply of a cryptocurrency can have an impact on its potential for long-term growth and adoption. Cryptocurrencies with a larger circulating supply may have a greater potential for widespread adoption and use, as there are more coins or tokens available to the public. However, this can also lead to increased volatility and instability in the market, as there are more coins or tokens that can be traded at any given time.
Simplified Example
Circulating supply can also be compared to the number of shares of a company that are available for trading in the stock market. The number of shares in circulation affects the company's market capitalization, which is similar to the market capitalization of a cryptocurrency that is derived from the circulating supply and current market price.
So, in essence, circulating supply is the amount of cryptocurrency that is available to the public to buy, sell, or trade, and it can impact the price and value of the cryptocurrency in a manner similar to the impact of the amount of money in circulation on the economy.
The History of Circulating Supply
The term "circulating supply" gained prominence in the cryptocurrency space during the mid to late 2010s as the market expanded rapidly.
As cryptocurrencies gained popularity, investors, analysts, and enthusiasts sought ways to evaluate and understand a cryptocurrency's actual market availability. The concept of circulating supply provided clarity on the number of coins or tokens that were not locked or held by the project team or reserved for future use but were instead available for trading, transactions, and general use among the public.
Over time, the term "circulating supply" became a standard metric in the cryptocurrency space, playing a pivotal role in assessing a cryptocurrency's market capitalization, pricing dynamics, and investor sentiment. Its evolution aligned with the need for transparency and clarity in understanding the true circulating volume of cryptocurrencies, shaping how market participants perceive and analyze digital assets.
Examples
Bitcoin (BTC): As of February 2023, the circulating supply of Bitcoin is approximately 19 million BTC. This represents the total number of Bitcoin that is currently in circulation and available for trading, mining, or other activities.
Ethereum (ETH): As of February 2023, the circulating supply of Ethereum is approximately 119 million ETH. This represents the total number of Ethereum that is currently in circulation and available for trading, staking, or other activities.
Binance Coin (BNB): As of February 2023, the circulating supply of Binance Coin is approximately 169 million BNB. This represents the total number of Binance Coins that are currently in circulation and available for trading, staking, or other activities on the Binance Smart Chain.
Related terms
Max Supply: Max supply refers to the maximum amount of a cryptocurrency that will ever be in circulation.
Liquid Market The liquid market, sometimes called the perfect market, is an idealized economic concept wherein all participants in a given industry have equal access to information and pricing.