Circulating supply is referred to as the number of cryptocurrency coins or tokens that are publicly available and circulating in the market. A cryptocurrency’s circulating supply can be used to compute a coin’s market capitalization, which is calculated by multiplying the current market price by the number of coins in circulation. Wanna know more? scroll down.
What Is Circulating Supply?
The number of cryptocurrencies or tokens that are publicly available and circulating in the crypto market is referred to as the circulating supply. A cryptocurrency’s circulating supply can be used to compute a coin’s market capitalization, which is calculated by multiplying the current market price by the number of coins in circulation.
The market capitalization of a coin is used to determine its dominance and popularity. It aids in making more informed investment selections.
The circulating supply of cryptocurrencies might rise or fall over time. One of the best-performing digital currencies, Bitcoin, has its circulation supply planned to steadily expand until the maximum quantity of 21 million is reached.
Understanding Circulating Supply
The circulating supply refers to coins that are available to the general public and should not be confused with the total supply or maximum supply. The total supply is used to calculate the number of coins in circulation, which is the number of coins that have already been issued minus the ones that have been burnt.
The entire supply is essentially the sum of the circulating supply and the coins in escrow. The max supply, on the other hand, quantifies the maximum number of coins that will ever exist, including coins that will be mined or made available in the future.
The value of cryptocurrencies is governed by the law of supply and demand, just like the value of any other asset. The value of a cryptocurrency is defined by what people are willing to pay for it and what they are prepared to sell it for.
The supply under the law of supply and demand is circulating supply. If it is high and demand is low, the prices of individual coins will fall. If supply is limited and demand is high, coin prices will rise, increasing the worth of the coins.
How To Calculate Circulating Supply
First, the data on the digital currency’s website should have the most recent timestamp. The value of the coins in circulation can then be calculated by dividing the total quantity of coins in circulation by the total number of coins in circulation. Let’s look at SALT as an example.
SALT is a digital currency that maintains track of how many coins are in circulation. According to SALT’s website, the current amount of coins in circulation is 46,346,535. So, to calculate the circulating supply of SALT, divide 46,346,535 by the total amount of SALT available, which is 108,639,803. This results in a SALT circulation supply of 32.18%.
The circulating supply can be calculated by dividing the market cap by the coin price. The formula is the following:
- Market Cap / Price = Circulating Supply
For Bitcoin, the $380 billion market cap can be divided by the $20,000 price, producing a result of 19 million BTC.
Why Does Circulating Supply Matter?
The total amount of a digital currency held by the public is represented by its circulating supply. As a result, the supply influences the value of digital money. The circulating supply is one of the most critical aspects in determining the value of a digital currency.
If a digital currency has a limited circulating supply, it suggests that there aren’t many coins in circulation. As a result, the value of this digital currency is heavily influenced by market demand. If individuals begin to value digital money with a low circulating quantity, demand for that currency will increase. Increased demand for digital currency can cause its value to rise over time.
Conclusion
Understanding the circulating quantity of cryptocurrencies is critical to help with crypto trading because the law of supply and demand dictates the value of various cryptocurrencies. Such understanding can make cryptocurrency trading easier and more rewarding.
