Circulating Supply Meaning
What is Circulating Supply?
The term “circulating supply” refers to the number of a certain cryptocurrency’s tokens or coins that are publicly available for trade in the crypto market. In other words, it is the supply in the law of supply and demand.
The circulating supply of a coin can gradually increase or decrease. This is mainly because most crypto projects don’t release all the coins to the market at once. Instead, they release a portion and mint/mine more over time, mostly through proof-of-stake (PoS) and proof-of-work (PoW) mechanisms. It is the supply in the law of supply and demand.
It increases when more tokens/coins are mined or released to the market. Alternatively, its supply may decrease when some coins are permanently removed from circulation during an event called coin burn.
For instance, as of this writing, the circulating supply of BTC is 19.33 million coins. But the maximum supply of BTC was capped at 21 million coins. This means that the circulating supply will gradually increase until it reaches the maximum supply.
Consequently, it is used to determine the size of the crypto’s economy and in calculating its market capitalization. Market capitalization (market cap), which is the total dollar value of a certain crypto’s coins that are circulating in the market, is obtained by multiplying the current price of a single coin by the number of tokens/coins in circulation.
The circulating supply of a cryptocurrency should not be confused with its total or maximum supply. The total supply accounts for the coins that are currently in existence, i.e., the sum of coins that are circulating in the market and those that are locked or reserved. On the other hand, the maximum supply is the approximation of the number of coins that will ever exist.
Take ADA as an example. Its circulating supply is around 34.7 billion, the total supply is approximately 35.6 billion, and the maximum supply is 45 billion coins.
It’s also important to note that only a few coins, such as BTC, ADA, and XRP, have a maximum supply.