What are the differences between crypto available supply and total supply? Most average crypto users may think that the available supply and total supply of crypto coins are the same and they are not to blame for that because the terms, by themselves, do not differentiate each other.
If you too are one of them, you are in the right place. This article will let you know about the differences between available or circulating supply and the total supply of crypto coins.
Such knowledge is very important because this will help you to make your investment decisions by being more informed, knowledgeable and confident.
It will help you to pick and choose the right type of crypto coin or coins from a wide assortment of them that comes with different supply volumes, market capitalizations and prospects.
Typically, the available supply and total supply of crypto coins affect the crypto markets differently and significantly.
Therefore, it is important that you know about them in depth because it will help you to avoid any adverse effects on the market, and in turn, your crypto investment endeavors may have due to the fluctuations in the supply of crypto coins.
Crypto Available Supply vs Total Supply – The Differences
Here are some of the differences between the total supply of crypto coins and the available or circulating supply of them. Read on to be enlightened.
If you go by the literal meaning of the definitions, circulating or available supply of crypto coins refers to the number of coins that have been created by the issuer already and are in circulation in the market.
On the other hand, considering the same, the total supply of crypto coins refers to the number of those coins that can be created in total. However, this is not the approximated number of crypto coins that may exist in the entire life of the particular crypto coin.
The available supply of crypto coins refers to the total number of crypto coins that are in existence or available as of now excluding the number of coins that have been burned by the issuers verifiably.
On the other hand, the number of total crypto coins in supply is achieved by considering the number of coins that are in the hands of the general public who trade them over different crypto exchanges.
Determining Market Capitalization
The available or circulating supply is considered to be a much more useful metric that helps the issuers of the coins to determine the market capitalization.
This is because this process where circulating supply is used to determine the market cap of a coin is quite analogous to the process in which public float is used to determine the market cap of the companies involved in traditional investing.
In comparison, the total supply of crypto coins does not help in calculating the market cap of a particular crypto coin.
When you know the available supply of a crypto coin it will let you know exactly how liquid the crypto market is.
This means that it will let you know how easily and quickly you can liquidate your crypto holdings or convert your crypto coins into cash. This, however, is not possible if you know the total supply of coins only.
The available supply of crypto coins, if you know the number, will also be of significant help when it comes to factoring the effects of probable deflation into your crypto investment analysis.
This is especially a very helpful aspect if you are dealing with those particular crypto coins that are known to have a fixed available supply such as Bitcoin, Zcash, and others.
However, this may not be possible that easily if you know the total supply of crypto coins only since it will be difficult to evaluate crypto coins against each other if you do not know about the market cap of them in the first place.
The market cap, as you may know, is one of the most important factors for making such evaluations.
Inclusions and Exclusions
When the available supply or circulating supply of coins in the market is calculated, all those crypto coins that are reserved, locked, or not being able to sell them on the public market are excluded. This is done so that the value does not affect the market cap.
On the other hand, while calculating the total supply of a particular crypto coin the number of coins available in the market as well as those that are yet to come to the open market are included as well.
This includes all those coins that are held under a vesting or lockup period. Typically, these coins are those that follow an Initial Coin Offering event or a private sale. However, crypto coins that are burned eventually are excluded from the total supply figure.
Which Affects the Crypto Market More – Crypto Available Supply or Total Supply
When the total supply of crypto coins is reduced it inherently and inevitably increases the scarcity of them and, in turn, increases its demand and value at the same time.
According to a few crypto market experts, such an event affects the crypto markets significantly.
They say that the crypto miners will now be left with no other alternative but to be forced away from receiving the block rewards for their contribution to the blockchain once it reaches the maximum supply in circulation in the market.
Moreover, the experts also say that both the available supply and total supply of crypto coins in the market have a significant effect on the price of a crypto token.
Apart from that, the amount of coin supply, both available and total, also helps the issuers of the coins to evaluate correctly the amount of Initial Coin Offerings to make.
It also helps them to determine the kind of budget they require to successfully launch the particular product in the market as well as determine the kind of demand the coins would generate on different crypto exchanges.
Ideally, a crypto coin cannot run out of the available supply but the supply of it can surely be stopped from increasing.
This is done to maintain the price of the coin because the more the available supply of a coin, the less will be its price.
The supply of crypto coins in the market is also considered to be an important metric that affects the size of cryptocurrencies.
Ideally, according to the experts an available supply of anywhere between 60 million and 150 million should be considered as good for any type of crypto coin.
This is because such a good circulating supply will create adequate demand among the investors.
When the production rate of the crypto coin is increased, it consequently increases the negative effect it has on the price of that specific coin.
However, the converse is also true considering the type of crypto asset in question.
Therefore, there is one thing in common when it comes to the price and supply effect which is: when the available supply of a crypto token increases, the price of each coin decreases and vice versa.
And, considering the players of the crypto market, the investors typically tend to buy those crypto coins that are cheap.
This is because they want to see some good results and get higher returns from their investments.
However, there is one most vitally important factor that most of the crypto investors overlook, which is the available supply.
This is an important metric because one needs to consider the fact that with hundreds of ICOs and new crypto coins being launched every month, it is just a matter of time that the coins that have the maximum available supply will be derelict all over the world.
The available supply of crypto coins can be a fluctuating value. This means that the number of coins may increase or decrease over time. There are two specific reasons for this.
When it comes to the increase in the number of crypto coins it can be done in two particular ways.
- First, it usually happens specifically if the particular crypto coin is mineable. This means that the new coins created will add up to the total supply of it gradually.
- On the other hand, if a particular crypto token is centralized, the supply of it can be augmented by the developers of the coin according to their wish through instant minting.
Conversely, the total supply of a crypto coin can also be decreased, and, in that case, there are two specific ways in which it can be done as well.
- The supply of crypto coins can go down either deliberately through a process called crypto burning.
- On the other hand, the volume of crypto coins can also go down due to some specific accidents such as losing the private keys and access to a crypto wallet where funds are stored or sending the coins to an address that is literally irrecoverable.
However, the available supply of a particular crypto coin also helps in calculating the market cap of that particular coin.
In this process, the market cap of a coin is calculated using the formula – (price of coin) x (circulating supply).
Another significant importance of the available supply or circulating supply of a crypto coin that lets one know the number of coins that exists in the market currently is that it allows you to choose a particular coin depending on your particular crypto needs.
And, while cryptocurrencies are attaining mainstream adoption slowly but surely, people also say that when the supplies of coins are fixed it will actually prevent the people from spending.
This will mean that the number of crypto coins people hoard will be more like a speculative investment.
This is because depreciation of an asset is impossible when it is finite. This puts the crypto investors and owners at risk since they have to wait for their coins to get cheaper.
This, eventually, will leave crypto coins at an impasse. It leads to an important question: how crypto coins can be transacted as and when it gains momentum and becomes mainstream adoption with an anticipation that their worth will be more in the future.
The best answer to this question is: by making even a small purchase by using crypto coins and then buying more of these coins immediately by using fiat money.
This will remedy the situation and at the same time will help in demonstrating the utility of these coins.
It will boost up the demand for cryptocurrencies and more and more merchants will accept crypto coins as an effective and useful mode of payment.
When the prices of crypto coins fall with the number of them in the market remaining stagnant, the divisibility of these coins will be an important deciding factor on whether or not the level of supply should be kept strong.
Whether a particular crypto coin has 8 or 18 decimal places, as Satoshi Nakamoto reasoned, it will ensure that people can still continue to make small purchases using crypto coins or it can also be exchanged for different fiat currencies or crypto coins with separate values.
Therefore, the supply of crypto coins will have a significant effect on the crypto market over time mainly due to its divisibility.
Understanding the differences between the available supply and total supply of crypto coins is very important for all crypto users. This article must have proved to be useful in that aspect and now you can make a more informed crypto decision.