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Users who are new to Cryptocurrency will find it difficult to understand the
coin market capitalization. For better understanding we’ve already made a
post explaining Cryptocurrency market capitalization, supply and volume.
If you are new then we suggest you to go through that article. Market
demand and supply is the main factor that determines a coin’s value. Less
the supply, more the demand and so more the coin’s value will be. Hence it
is very important that you analyze the coin supply before investing or start
mining it.
All most all crypto currencies are capped to certain numbers. There are few
crypto’s which are not hard capped and have infinite supply. On the other
hand there are also coins (ICO) that are locked by a individual or a
company which then be released onto the market (eg: Ripple XRP). A coins
supply is one of the most important factor that affects the market cap and
it is the most misunderstood metric by many newbie’s.
Here we’ll explain what circulating supply, total supply and max supply in
a Cryptocurrency is.
Before explaining about crypto currency supply system we’ll see where to
get the supply information of a particular crypto currency. There are three
sources where you can usually find the supply information of a coin.
Total Supply:
The amount of coins that is already in circulation + new mined coins which
are not in the market is the Total supply. Total supply is the total number
of coins that is currently in existence however not all are circulating. For
several reasons there are coins that are reserved or locked and are not sold
for public market which doesn’t affect the coin price. Total supply is
normally equal or greater than the circulating supply.
Maximum Supply:
It is the maximum number of coins that will ever exist for a crypto
currency. There won’t be any more supply once a coin reaches its max
supply cap as it is the maximum amount that can ever be mined or
produced.
Infinite Supply:
Yes, you heard it right! There are coins with infinite supply (eg: Ethereum).
Ethereum current circulating supply is 97,993,104 ETH, however it has no
hard cap and its max supply is Infinite. So you might ask; if Ethereum is
infinite then doesn’t that limit its value.
A coin is designed in such a way that it should never exceed its max supply.
However the question is will a coin reach its max supply and when? Let’s
take Bitcoin as a example. It is estimated that around year 2140 BTC will
reach its maximum supply. Bitcoin has controlled supply and its block
reward decreases every 4 years. Its expected by the year 2032 99% of the
Bitcoins will be mined. To mine just that last 1% it takes 100 years.
Practically we don’t think Bitcoin will reach its maximum supply which is
21 million. One reason is there are so many Bitcoins that are lost which are
of no use. Also the miners won’t continue mining if the rewards are too
less.
So what happens once Bitcoin reaches its maximum supply? The answer is
simple. There would be no more inflation. If the demand of the coin keep
raising then its value will raise substantially. But will the demand for
Bitcoin raise in future, who knows?
We hope you find this information helpful if so then please do share it. If
you have any thoughts on cryptocurrency coin supply that you’d like to add
then please comment.