What is Total Supply?
Total supply refers to the total number of coins or tokens that have been created or mined for a cryptocurrency, excluding those that have been burned. It represents the sum of coins currently in circulation and those that are locked but does not include any coins that can still be created in the future.
This metric is different from circulating supply, which accounts only for the coins or tokens currently available for use in the market. Circulating supply is more relevant for calculating a cryptocurrency’s market capitalization, as it reflects the number of coins actively influencing the price.
Key Aspects of Total Supply
- Includes Locked Coins:
Total supply accounts for coins locked due to pre-mining or held in smart contracts. These locked coins may be released later based on certain conditions, such as the completion of an ICO or specific milestones. - Excludes Burned Coins:
Coins that have been permanently removed from circulation through burning are not included in the total supply. - Differs from Circulating Supply:
Circulating supply includes only the coins available for trade or use, while total supply includes both circulating coins and those that are currently inaccessible. - Not the Maximum Supply:
Total supply is distinct from maximum supply, which represents the upper limit of coins or tokens that can ever exist. For example, Bitcoin’s maximum supply is capped at 21 million coins.
Why Total Supply Matters
Total supply can provide insights into a cryptocurrency’s potential profitability and the future dynamics of its market. For instance:
- Supply Gaps and Future Profitability: A significant difference between circulating supply and total supply suggests that a large number of coins could enter circulation in the future, potentially exerting downward pressure on prices.
- Locked Tokens: Tokens locked in smart contracts may signal a strategic release plan, often used to prevent market oversupply.
Investors can use total supply to gauge whether a cryptocurrency’s current price reflects its long-term value or whether an influx of new tokens could dilute its worth.
Example: Bitcoin
Bitcoin has a maximum supply of 21 million coins, meaning no more than this number can ever exist. However, not all of these are included in the circulating or total supply. For instance, it is estimated that around 4 million BTC are lost or missing, reducing the effective circulating supply. Such factors contribute to Bitcoin’s scarcity and potential long-term value.
Conclusion
Total supply is a valuable metric for understanding the broader supply dynamics of a cryptocurrency. While it includes coins that are locked or inaccessible, it differs from circulating supply, which directly affects price and market capitalization. By analyzing total supply alongside other metrics, investors can make more informed decisions about the potential profitability and risks of a cryptocurrency.