Circulating Supply refers to the total number of cryptocurrency tokens or coins that are publicly available and actively circulating in the market at a given time. It excludes coins that are locked, reserved, or otherwise unavailable for trading. This metric is crucial for determining a cryptocurrency’s market capitalization and understanding its liquidity and availability.
What Is Circulating Supply?
Circulating Supply represents the portion of a cryptocurrency’s total supply that is accessible to the public and can be traded on exchanges or used in transactions. It is a dynamic figure that can change over time due to factors such as mining, token burns, or the release of previously locked tokens.
This metric is distinct from “Total Supply,” which includes all coins that exist (including locked or reserved ones), and “Max Supply,” which is the maximum number of coins that will ever exist for a cryptocurrency. Circulating Supply is often used in calculations like market capitalization, which is derived by multiplying the Circulating Supply by the current price of the cryptocurrency.
Who Determines Circulating Supply?
Circulating Supply is typically calculated and reported by cryptocurrency projects, blockchain explorers, or third-party data aggregators like CoinMarketCap and CoinGecko. These entities gather data from blockchain networks, project teams, and exchanges to estimate the number of coins in circulation.
However, the accuracy of Circulating Supply depends on the transparency and reliability of the data provided by the cryptocurrency project. Some projects may overstate or understate their Circulating Supply, which can mislead investors and traders.
When Is Circulating Supply Relevant?
Circulating Supply is relevant at all times in the cryptocurrency market, as it directly impacts a coin’s market capitalization and perceived value. It is particularly important during the following scenarios:
- When evaluating a cryptocurrency’s market cap to compare it with other projects.
- When assessing the liquidity and availability of a token for trading.
- During token launches or initial coin offerings (ICOs), where the initial Circulating Supply can influence early price movements.
Understanding Circulating Supply is also critical during events like token burns, staking rewards distribution, or the unlocking of vesting schedules, as these events can alter the supply dynamics.
Where Is Circulating Supply Found?
Circulating Supply data is commonly found on cryptocurrency tracking platforms such as CoinMarketCap, CoinGecko, and Messari. It is also available on blockchain explorers specific to a cryptocurrency, such as Etherscan for Ethereum-based tokens or BscScan for Binance Smart Chain tokens.
Additionally, cryptocurrency project websites and whitepapers often provide information about the initial Circulating Supply and any mechanisms that may affect its future availability.
Why Is Circulating Supply Important?
Circulating Supply is a key metric for understanding a cryptocurrency’s market dynamics. It plays a critical role in:
- Calculating Market Capitalization: Market cap is determined by multiplying the Circulating Supply by the current price of the cryptocurrency. This helps investors gauge the relative size and value of a project.
- Assessing Liquidity: A higher Circulating Supply generally indicates greater availability of the token, which can lead to better liquidity and price stability.
- Evaluating Scarcity: Cryptocurrencies with a low Circulating Supply relative to their Total or Max Supply may be perceived as more scarce, potentially driving demand.
- Making Investment Decisions: Investors often analyze Circulating Supply alongside other metrics to determine whether a cryptocurrency is overvalued or undervalued.
Without an understanding of Circulating Supply, it would be difficult to accurately assess a cryptocurrency’s market position or potential for growth.
How Is Circulating Supply Calculated?
Circulating Supply is calculated by subtracting the number of coins that are locked, reserved, or otherwise unavailable from the Total Supply. The formula can be expressed as:
Circulating Supply = Total Supply – (Locked Coins + Reserved Coins)
The calculation involves analyzing on-chain data to identify wallets or addresses holding locked or reserved tokens. For example:
- Tokens held in smart contracts for staking or vesting are excluded from the Circulating Supply.
- Coins held by project teams for future development or marketing purposes are also excluded.
- Burned tokens, which are permanently removed from circulation, are subtracted from the Total Supply.
Blockchain explorers and data aggregators automate this process by analyzing transaction histories and wallet balances to provide up-to-date Circulating Supply figures.
Understanding Circulating Supply is essential for anyone participating in the cryptocurrency market, as it provides valuable insights into a token’s availability, value, and potential for growth.
