Cryptocurrency is a buzzword that has been making headlines for years. With the growth of digital assets, there are many terms and concepts to understand. One of these concepts is the difference between Circulating Supply and Total Supply.
According to CoinMarketCap, in August 2021, the total Bitcoin supply reached 21 million coins, while the circulating supply was around 18.8 million coins. This means almost 2.2 million Bitcoins remain to be mined, but what does this mean for investors? Understanding the differences between these two types of supply can help traders make informed decisions regarding their investments and navigate the volatile world of cryptocurrency effectively.
Understanding the Concept of Circulating Supply
Have you ever heard the terms “Circulating Supply” and “Total Supply” when it comes to cryptocurrencies? Understanding these concepts can be confusing for those new to the world of crypto. Let us share with you a metaphor that will help you understand it all.
Imagine you go to a bakery and see two types of bread: one is freshly baked and ready to be sold. While the others are still dough waiting to be in the oven. Sliced bread represents circulating supply, which refers to the amount of cryptocurrency already in circulation and available for trading. On the other hand, total supply includes the amount currently in circulation plus any coins or tokens that have not yet been released.
It's important to understand what is meant, as it influences how we view market capitalization. Market capitalization takes into account the current price per coin multiplied by the circulating supply. Basically it gives us an idea of how much value there is in all the coins/tokens currently trading on exchanges.
In short, understanding circulating supply means understanding the number of coins/tokens currently available for trading. In contrast, total supply includes all coins/tokens ever created, regardless of whether they are in circulation or not.
Understanding the Meaning of Total Supply
While circulating supply refers to the number of tokens currently in circulation, total supply includes every token that has ever been mined or. This means that although some tokens are held in reserve or locked for a period.
Now that we understand what circulating supply is, let's talk about it next. While circulating supply refers to the number of tokens currently in circulation, total supply includes all tokens ever mined or created by a cryptocurrency project. This means that even if some tokens are held in reserve or locked for a certain period of time, they still count towards the total supply.
It's important to note that just because a cryptocurrency has a high total supply, it doesn't mean it's worth less. The value of a cryptocurrency depends on many factors beyond its quantity.
Conclusion
So, why is this distinction between Circulating Supply and Total Supply important? Understanding these numbers can give us insight into how much liquidity a particular cryptocurrency has, which can impact market price and overall adoption.
In conclusion, understanding the differences between the two is very important for every crypto investor. If an investor does not take this into account when evaluating a coin's value, they may misjudge its growth potential and make a poor investment decision. Therefore, it is important to know both numbers before investing in any cryptocurrency.