Circulating Supply

Circulating Supply Definition: The total number of a cryptocurrency’s tokens that are actively available and circulating within the market, excluding any tokens that are locked or reserved.

The circulating supply refers to the total number of cryptocurrency tokens or coins that are publicly available and actively circulating in the market. This represents the portion of a cryptocurrency’s total supply currently traded or held by users, excluding coins that are locked, reserved, or not yet released.

It’s essential to differentiate circulating supply from total supply and max supply. Circulating supply includes coins available for trading, while total supply accounts for all coins that exist, including those locked or unreleased. This distinction often reveals insights into a cryptocurrency’s distribution strategy or economic model.

Why is circulating supply important? It significantly impacts a cryptocurrency’s market capitalization—a key metric for assessing market value—calculated by multiplying a cryptocurrency’s current price by its circulating supply. Knowing the circulating supply enables investors to evaluate a cryptocurrency’s relative size in the market.

Circulating supply also sheds light on a cryptocurrency’s distribution. A large circulating supply can indicate widespread distribution, potentially minimizing price manipulation risk from major holders, or “whales.” Conversely, a smaller circulating supply might suggest higher token prices due to supply-demand dynamics, but could also hint at centralization or scarcity.

Consider Bitcoin as an example. While Bitcoin’s total supply is capped at 21 million, not all of these coins are in circulation. Many have been lost or are yet to be mined, making Bitcoin’s circulating supply a more accurate indicator of its available trading volume at any time.

Investors should approach circulating supply critically. Some projects reduce their circulating supply by locking tokens, creating an illusion of scarcity. Others may have vesting schedules for team members or advisors, gradually adding tokens to circulation over time.

In summary, circulating supply provides valuable insights into a cryptocurrency’s availability, distribution, and potential market value.