Understanding Total Supply
The concept of total supply refers to the quantity of coins that have already been generated or mined.
It is crucial to acknowledge that not all coins included in this measurement are available for use, and any coins that have been burned are not taken into consideration.
This is in contrast to circulating supply, which calculates the overall number of tokens or coins that have been mined and are accessible for use. It does not encompass coins that can be created but have not yet been generated.
When determining the market capitalization of a cryptocurrency, circulating supply is typically utilized instead of total supply. This is because cryptocurrency prices are primarily influenced by coins and tokens that can be used, rather than those that are inaccessible.
Total supply encompasses coins that have been locked, either intentionally kept out of circulation as pre-mined coins or locked in smart contracts.
Tokens can be locked in smart contracts until a specific purpose has been achieved, such as certain stages of an initial coin offering (ICO) for a particular cryptocurrency.
Examining the total supply can be a crucial indicator of a cryptocurrency’s profitability and can assist investors in determining whether or not to invest in a virtual currency.
For instance, a significant gap between circulating supply and total supply can have implications for future profitability. The introduction of numerous tokens into the market can exert downward pressure on cryptocurrency prices.
It is important to note that total supply does not determine the maximum number of tokens or coins that can ever be mined.
For example, in the case of BTC, the maximum amount that can ever be created is capped at 21 million. However, it is estimated that around four million BTC are missing or considered “lost”.
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