Circulating supply means the total number of coins (Bitcoin, Ethereum, Tether, BNB, USD Coin, XRP, and Dogecoin) or tokens available in the marketplace to sell and buy, moreover, if you can trade coins or tokens, they are considered circulating.
Most of the users got confused about total supply, max supply, and circulating supply, here I am going to let you know the main difference between them.
Max Supply: Max supply means the end value of a quantity, which means will not grow more moreover the extremity point, where the growth ends. Once it reaches, there won’t be more coins mined.
Total Supply: It means the total number of coins that have been created moreover, the total number of coins that are in existence.
Why Circulating Supply is Used
It is used to determine the market capitalization of any cryptocurrency and is determined by multiplying the total number of circulated coins by the current market value of a single coin or token. Market cap is the total value of the total number of shares of a company’s stock.
Here I am going to discuss how to find market capitalization, by the value of circulating supply we can determine the market cap.
Market Capitalization = Circulating Supply * Market Price of Assets
Circulating Supply = x
Assets Market Price = y
Market Capitalization = MCAP
MCAP = x*y => equation a,
For instance, Bitcoin has a circulating supply (x) of 20 million coins, and the current price (y) is $ 20,000.
Note: Current price is the value of the current assets at the marketplace.
x = 20 million coins and y = $20k
Therefore, to find the MCAP we have to multiply x by y. Hence by putting the value in equation a.
MCAP = x*y MCAP = 20 million * $20k MCAP = USD $ 400 billion
Circulating supply means the total number of coins available in the market to sell and buy; it is used to determine the market cap by multiplying circulating supply into current asset market value. You shouldn't be confused between circulating, max, and total supply. Max supply means the extremity point and total supply means the total number of existing coins.