Circulating Supply is an important concept in the cryptocurrency market. It directly affects the value and investment potential of a cryptocurrency in the crypto bubble. Understanding the supply in circulation and the factors that affect it helps investors make informed investment decisions and limit risks. This article will provide you with detailed information about Circulating Supply. Follow Crypto Trading now!
The Importance of Circulating Supply in Investing
Circulating Supply is the number of tokens/coins of a crypto project that are circulating on the market and can be freely traded. This is an important factor that affects the value and investment potential of a cryptocurrency.
Circulating Supply Affects Cryptocurrency Value
Supply influences the basic law of supply and demand:
- Low Circulating Supply: When supply is low, a cryptocurrency becomes scarcer. This leads to higher demand and the value of the coin tends to increase.
- High Circulating Supply: When supply is high, the cryptocurrency becomes more popular. This leads to more selling pressure and the value of the coin tends to decrease.
However, it is important to note that supply is just one factor among many that influence the value of a cryptocurrency. Other factors include:
- Total Supply: Includes both circulating supply and uncirculated tokens/coins.
- Market Demand: Demand for buying/selling tokens/coins on the market.
- Use Value: The potential applications and use value of a cryptocurrency in real life.
- Market Psychology: Investor optimism/pessimism affects buying/selling behavior.
See more: “Decoding the secret” derivatives in crypto trading
Crypto Heatmap Assesses Investment Potential
The Crypto Heatmap is a data visualization tool that helps investors evaluate the investment potential of cryptocurrencies based on a variety of factors, including:
- Price Volatility: The rate at which a currency’s value changes over a given period of time.
- Trading Volume: Total amount of tokens/coins bought and sold in a given period of time.
- Market Cap: Market value of all tokens/coins in circulation.
- Circulating Supply: Number of tokens/coins circulating on the market.
- Social Media: Level of interest and discussion about the coin on social media.
The Crypto Heatmap helps investors easily compare and select cryptocurrencies with high growth potential based on fundamental factors and market trends.
Relation to crypto chart market capitalization
Market Cap is the market value of all tokens/coins in circulation, calculated by multiplying Circulating Supply by the value of each token/coin.
For example:
- Bitcoin has a supply in circulation of 19 million and a price of $30,000 per Bitcoin. So the Market Cap of Bitcoin is 19 million * $30,000 = $570 billion.
Relationship between Circulating Supply and Market Cap:
- As supply increases, Market Cap will also increase if the value of each token/coin remains constant.
- As supply decreases, Market Cap will also decrease if the value of each token/coin remains constant.
- However, the value of each token/coin can also change due to other factors such as market demand, market sentiment, etc., resulting in Market Cap fluctuations that are not entirely dependent on supply.
Factors Affecting Circulating Supply
Here are the main factors that affect supply:
Coin issuance and burning process Circulating Supply
Coin Issuance: Each crypto project has its own coin issuance schedule, which is specified in the Whitepaper or Roadmap. The coin issuance process can affect the circulating supply in the following ways:
- ICO (Initial Coin Offering): Initial coin sale to investors, increasing supply.
- Mining: Reward tokens/coins to miners when confirming transactions, increasing supply.
- Staking (Lock Coin): Users lock coins to receive interest, temporarily reducing the circulation supply.
- Airdrop: Distribute free tokens/coins to users, increasing supply.
Coin Burning: Some crypto projects have coin-burning mechanisms to reduce Circulating Supply, and increase the value of the coin. Coin burning can be done in the following ways:
- Burning: Burn a certain amount of coins periodically or based on revenue.
- Buyback: The project buys back tokens/coins from the market and burns them.
- Fee Burning: Transaction fees are burned to reduce supply.
Hoard and store the crypto bubble
Hoarding: When investors buy and hold tokens/coins, they reduce the Circulating Supply, which can lead to an increase in the value of the coin.
Storage: Storing tokens/coins securely also helps reduce supply, allowing the value of the coin to increase.
Crypto Bubble: A cryptocurrency bubble occurs when the value of a coin increases dramatically due to investors’ FOMO (fear of missing out), rather than based on the true value of the project. When the bubble bursts, the value of the coin can plummet, affecting it.
Economic and political events impact crypto charts
- Economic Events: Economic events such as inflation, recession, changes in monetary policy, etc. can affect market sentiment. This leads to fluctuations in cryptocurrency value and circulation supply.
- Political Events: Political events such as elections, new legislation, etc. can also affect the legal and regulatory environment for cryptocurrencies, impacting the coin’s value and supply.
For example:
- In 2021, China issued a ban on cryptocurrency trading. This led to a decrease in the value of Bitcoin and many other cryptocurrencies. At this time, it was also affected.
- In 2022, the US Federal Reserve (Fed) raised interest rates to fight inflation. This caused strong fluctuations in the global financial market. The value of Bitcoin and many other cryptocurrencies also fell sharply. Circulating Supply was affected.
Circulating Supply and Crypto Bubble Tracker
Keeping track of supply and related factors such as crypto bubbles is essential for investors to effectively assess investment potential and risks.
Popular crypto heatmap websites and platforms
There are now many websites and platforms that provide circulating supply tracking tools and crypto chart heatmaps. The purpose is to help investors easily grasp information and make informed investment decisions.
See more: Opening an Bybit exchange account for traders
Here are some popular websites and platforms:
- CoinMarketCap: The website provides detailed information about over 17,000 cryptocurrencies. It includes supply, market cap, value, trading volume, etc.
- CoinGecko: This site provides similar information to CoinMarketCap. It also features a crypto heatmap that visualizes price movements, trading volume, and Market Cap of multiple cryptocurrencies.
How to use these tools on crypto charts
Track Circulating Supply: Compare current supply to Total Supply and past to gauge a cryptocurrency’s scarcity.
Crypto Heatmap Analysis: Observe price movements, trading volume, and Market Cap of multiple cryptocurrencies to determine market trends and investment potential.
Combined with technical indicators such as RSI, MACD, Bollinger Bands,… It helps confirm trends and give appropriate buy/sell points.
Read news and market analysis: Update news and events related to crypto projects, Blockchain layer ecosystem development, and cryptocurrency market to give a comprehensive assessment.
Conclude
Understanding Circulating Supply is an important step to succeed in the volatile cryptocurrency market. Using crypto heatmap and supply tracking tools combined with technical indicators, market news, and in-depth analysis on crypto charts will help investors make informed investment decisions and limit risks. However, Crypto Trading advises you to note that investing in cryptocurrencies is inherently risky. Investors need to carefully research crypto projects and the market before making investment decisions. And don’t forget to add more necessary Crypto knowledge on Crypto Trading Blog!
frequently asked Questions
What is the difference between Circulating Supply and Total Supply?
Total Supply is the total amount of tokens/coins that have been created. It includes both circulating supply and uncirculated tokens/coins.
How to know if a cryptocurrency has a low supply?
Compare the current Circulating Supply with the Total Supply and past to assess the scarcity of a cryptocurrency.
Can Circulating Supply Increase?
Yes, the supply can increase if the crypto project issues new tokens/coins.
