For stocks and other financial assets, we calculate market capitalization to know the total value of the assets. We do the same in the case of cryptocurrencies. However, the market cap is determined by multiplying crypto coin price by the total number of coins circulating in the market for cryptocurrencies.
Whether a coin has a good market cap or not is determined by finding the total value of the crypto coin. Today the top three cryptocurrencies by market cap are Bitcoin, followed by Ethereum and Binance coin. Now what gives these coins dominance by market capitalization is their demand in the crypto market.
Both demand and supply of your coin are what sets its value. Therefore, investors analyze these two factors thoroughly before investing or mining a coin. Also, cryptocurrencies use the supply principle for better growth in the market.
For all participants of the cryptocurrency market, the topic of coin supply is of enormous significance. To avoid misunderstanding the metric, read below.
What Does Supply Mean in Crypto?
You must have come across the word supply often in the world of crypto.
Generally, supply stands for the total number of crypto coins that are in circulation in the market.
The term is used in three ways for cryptocurrency: circulating supply, total supply, and maximum supply.
Three Types of Supplies you as a Crypto Investor Should Know About:
Often, people overlook the metric. However, the supply and demand metric is the one on which the market capitalization of a coin fully depends upon. The better knowledge you have about them, the better you perform as a crypto trader.
- Circulating Supply:
Circulating supply refers to the number of crypto coins being mined and generated at hand in the crypto market. In simple words, it refers to the number of crypto coins that are there in the hands of the people trading and are circulating in the crypto market.
- Maximum Supply:
Maximum supply, also known as fixed supply, stands for the maximum number of coins that will ever be available for a specific crypto coin in the digital asset market. The cryptocurrency will never surpass the specific maximum supply. Ultimately, the mining or production of the crypto coin stops after reaching the maximum supply, and there will be no new coins anymore.
You can easily calculate the max supply by adding the number of crypto coins that are still to be produced to those that are already produced and circulating in the market.
- Total Supply
The total supply of cryptocurrency stands for the total number of coins that currently exist in the crypto market. The total consists of the coins that are in circulation and are locked as well. However, the metric eliminates all the coins that are verifiably destroyed or burned.
To calculate the total supply of a coin, you subtract the number of destroyed or burned coins of the market from the total number of coins that have been produced yet.
How To Know About Supply Metrics?
Now that you know how significant the metrics are, you should know where you will find them for your specific crypto coin.
So, three reliable sources can be visited to find the supply information of a crypto coin:
- Official Website of Your Coin:
Whenever a coin is launched, its website is developed. You can go to the website of your respective crypto to access comprehensive information about the crypto coin and find the supply information there.
- Bitcoin Forum:
The Bitcoin forum is the platform that announces new crypto coins. On the forum, you can see an announcement page that will offer an insight into the coin’s supply details.
- Coinmarketcap Website:
The website contains information about the supply of all the cryptocurrencies available in the market. You can find the total, maximum and circulating supply for your coin by visiting the site.
You need to understand supply metrics regardless of which crypto you trade in. The better you analyze the circulating, total, and maximum supply, the higher the chances of making a better crypto trading decision.