What is Circulating Supply?
How it works
Circulating supply is calculated by taking the total supply of a cryptocurrency and subtracting any tokens that are not available for trading. These unavailable tokens may include those held by the project team in vesting contracts, tokens locked in smart contracts for staking or governance, tokens burned (sent to an irretrievable address), or tokens reserved for future issuance. For example, on Ethereum, the circulating supply of ETH is tracked by subtracting the amount of ETH burned via EIP-1559 from the total issuance. On Bitcoin, the circulating supply is the number of coins that have been mined and are not in lost wallets or held by Satoshi Nakamoto.
The circulating supply changes over time due to mechanisms like block rewards (e.g., Bitcoin adds new coins every block), token burns (e.g., Binance Coin quarterly burns), or vesting unlocks (e.g., tokens released from a project's treasury). Protocols like Chainlink (LINK) have a fixed total supply, but the circulating supply increases as tokens are gradually released from smart contracts. Stablecoins like USDC maintain a circulating supply that fluctuates with minting and redemption on platforms like Ethereum and Solana. The circulating supply is a dynamic figure that is updated by blockchain explorers like Etherscan or CoinMarketCap based on on-chain data.
Market capitalization is calculated as circulating supply multiplied by current price, making it a critical input for valuation. However, circulating supply can be manipulated by projects that lock large amounts of tokens to artificially inflate price or market cap rank. For accuracy, reputable data aggregators verify circulating supply by analyzing on-chain addresses, vesting schedules, and burn events. For instance, the circulating supply of XRP is adjusted for Ripple's escrow holdings, while the circulating supply of Filecoin accounts for tokens locked in storage deals.
Why it matters
Circulating supply is essential for understanding a cryptocurrency's true market value and liquidity. It directly determines market capitalization, which investors use to compare projects and assess potential growth. A low circulating supply relative to total supply can indicate future dilution risk as locked tokens are released, potentially suppressing price. Conversely, a high circulating supply with active burns can signal deflationary pressure. Accurate circulating supply data helps traders avoid overvalued assets and supports fundamental analysis in DeFi, where tokenomics heavily influence protocol sustainability.
Real-world examples
Bitcoin's circulating supply is approximately 19.5 million as of 2024, approaching its 21 million cap. Ethereum's circulating supply decreased after the Merge due to EIP-1559 burns. Binance Coin (BNB) has a circulating supply that reduces quarterly through token burns. Ripple (XRP) has a circulating supply of about 55 billion, with the rest held in escrow by Ripple Labs.
FAQ
How is circulating supply different from total supply?
Total supply includes all coins that have been created, including those locked or reserved, while circulating supply only counts those available for public trading. For example, XRP's total supply is 100 billion, but its circulating supply is lower due to escrow.
Can circulating supply decrease?
Yes, through token burns (e.g., BNB quarterly burns) or when tokens are locked in staking contracts and removed from circulation temporarily. However, most cryptocurrencies see circulating supply increase over time due to mining or staking rewards.
Why do some projects have a low circulating supply?
Projects may lock tokens in vesting contracts for team members, investors, or ecosystem development to prevent immediate selling pressure. This can create a lower circulating supply, potentially increasing scarcity and price, but carries risk of future dilution.
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