Introduction
In cryptocurrency, circulating supply refers to the number of coins or tokens that are actively available and trading in the market.
Unlike total supply (which includes locked or reserved tokens), circulating supply helps determine a coin’s market capitalization and influences price movement.
Understanding circulating supply is crucial for investors, traders, and analysts because it directly affects liquidity, volatility, and long-term value.
In this guide, we’ll explore what circulating supply is, how it’s calculated, and why it matters in crypto investments.
Learn more about cryptocurrency metrics in our Crypto Glossary.
Key Takeaways
- Circulating supply is the number of coins currently available for trading.
- It influences a cryptocurrency’s market capitalization and price.
- A low circulating supply can lead to higher volatility and price swings.
- Some cryptocurrencies use token burns to reduce supply and increase scarcity.
- Understanding supply mechanics helps investors make informed trading decisions.
What Is Circulating Supply in Cryptocurrency?
Circulating supply refers to the total number of coins or tokens that are currently in circulation and available for trading. It excludes tokens that are locked, staked, or reserved for future use.
Unlike total supply (which counts all issued tokens) or maximum supply (the absolute limit of coins that will ever exist), circulating supply provides a real-time snapshot of market availability.
How Is Circulating Supply Calculated?
Circulating supply is calculated by considering:
- Total issued tokens – The total number of coins created by the project.
- Locked or reserved tokens – Coins held by the project team, investors, or smart contracts.
- Burned tokens – Permanently removed coins that no longer exist.
- Mining and staking releases – Newly minted tokens from mining or staking rewards.
The formula for market capitalization is: Market Cap = Circulating Supply × Current Price
For example, if a cryptocurrency has 10 million tokens in circulation and is priced at $5 per token, the market cap would be $50 million.
Circulating Supply vs. Total Supply vs. Max Supply
Metric | Definition |
Circulating Supply | Tokens actively available for trading |
Total Supply | All tokens ever created minus burned tokens |
Maximum Supply | The hard limit of coins that will ever exist |
For example, Bitcoin (BTC) has a max supply of 21 million coins, but its current circulating supply is around 19 million as some coins are lost or not yet mined.
How Circulating Supply Affects Cryptocurrency Prices
Circulating supply directly impacts crypto prices, market cap, and investor sentiment:
1. Cryptocurrency Circulating Supply: Scarcity & Price
- Cryptos with low circulating supply (e.g., Yearn Finance – YFI) often have higher prices due to scarcity.
- Coins with high circulating supply (e.g., Dogecoin – DOGE) may have lower prices but greater liquidity.
2. Cryptocurrency Circulating Supply: Market Capitalization & Investment Perception
- A high market cap (large circulating supply × high price) indicates a well-established cryptocurrency.
- A low market cap may suggest a high-growth potential but also higher risk.
3. Cryptocurrency Circulating Supply: Token Burns & Supply Reduction
- Some cryptocurrencies use token burning to reduce circulating supply, increasing scarcity and potential value.
- Example: Binance Coin (BNB) burns tokens quarterly to decrease supply and boost price.
What Happens When a Cryptocurrency Reaches Max Supply?
When a cryptocurrency reaches its maximum supply, no new coins can be created. This can lead to:
- Increased scarcity (if demand remains strong, price may rise).
- Higher transaction fees (miners or validators rely on fees instead of block rewards).
- Potential deflationary effects (if coins are lost or burned over time).
For example, Bitcoin will reach its max supply of 21 million coins by 2140, after which miners will only earn fees for processing transactions.
Investment Strategies Based on Circulating Supply
Understanding circulating supply helps investors make informed decisions:
Cryptocurrency Circulating Supply: High Supply, Low Price Coins (e.g., SHIBA INU, XRP)
- Pros: Highly liquid, accessible to retail investors
- Cons: May have limited long-term scarcity value
- Best for: Short-term trading & high-volume transactions
Cryptocurrency Circulating Supply: Low Supply, High Price Coins (e.g., Bitcoin, Ethereum, YFI)
- Pros: Scarcity can drive long-term value
- Cons: Lower liquidity, higher price volatility
- Best for: Long-term holding & scarcity-based investment
Token Burning Projects (e.g., BNB, LUNA Classic)
- Pros: Decreasing supply can increase price over time
- Cons: Requires demand growth to be effective
- Best for: Long-term investment with strong project fundamentals
Frequently Asked Questions (FAQs)
1. What is the best circulating supply for cryptocurrency?
There’s no single “best” supply amount. Coins with low supply (BTC, YFI) benefit from scarcity, while high supply coins (DOGE, XRP) offer liquidity and accessibility.
2. How does circulating supply affect crypto price?
A lower circulating supply can lead to higher prices due to scarcity, while a higher supply may keep prices stable but reduce long-term growth potential.
3. Which cryptocurrency has the lowest circulating supply?
Some of the lowest circulating supply cryptos include Yearn Finance (YFI) with only 36,000 tokens and Bitcoin (BTC) with a 21M cap.
4. Does burning tokens affect circulating supply?
Yes, burning permanently removes tokens from circulation, reducing supply and potentially increasing value if demand stays strong.
5. How can I find a coin’s circulating supply?
Websites like CoinMarketCap and CoinGecko provide real-time circulating supply data.
Final Thoughts
Circulating supply is one of the most important factors in cryptocurrency valuation. It affects market cap, scarcity, and long-term price trends.
Whether you’re investing in low-supply, high-value coins or high-supply, high-liquidity tokens, understanding circulating supply can help you make smarter decisions.
For a more detailed breakdown of cryptocurrency metrics, check out our Crypto Glossary.