The total number of coins or tokens that are actively available in the market.
Circulating Supply refers to the total number of coins or tokens that are actively available in the market and can be bought or sold. This includes coins or tokens held by the public and excludes those that are locked, reserved, or not yet released. Understanding circulating supply is crucial for evaluating a cryptocurrency's market dynamics, as it represents the actual number of coins that can influence price movements through trading activity.
For instance, if a cryptocurrency has a total supply of 20 million coins, but 2 million are locked in a founder's wallet and 1 million are yet to be mined, the circulating supply would be 17 million coins.
Bitcoin Cash (BCH) has a circulating supply that increases with each new block mined (currently around 19.5 million coins), approaching its maximum supply of 21 million coins. This predictable issuance schedule creates transparency for investors and users regarding the future dilution rate.
The circulating supply of a cryptocurrency can change over time due to various factors. These include new coins being mined or created, coins being burned or destroyed, coins being locked in smart contracts or staking mechanisms, and coins being released from time-locked wallets. These dynamics create both predictable and unpredictable changes to the effective supply available in the market.
In the case of Bitcoin Cash (BCH), there are currently over 19 million BCH that have been mined. However, due to some being lost over time, there are fewer in actual circulation. Coins can be lost when the sole controller of a private key dies, the private key is lost or destroyed, or money is sent to an incorrect address. It is impossible to know exactly how many coins of a currency have been lost. In a decentralized system, we can only know the total coins that have been mined/created, the eventual max supply, and how much is being moved over periods of time.
Some cryptocurrencies implement scheduled token burns, where a portion of transaction fees or other tokens are permanently removed from circulation. This effectively decreases the circulating supply over time, potentially creating deflationary pressure on the token's price if demand remains constant.
The circulating supply is an important metric for investors as it can influence the price of a cryptocurrency. A lower circulating supply can lead to a higher price per coin or token, assuming demand remains constant. Conversely, a higher circulating supply can lead to a lower price per coin or token, assuming demand remains constant. This relationship forms the basis for understanding market capitalization and price dynamics.
If the circulating supply of a cryptocurrency is 1 million coins and the market cap is $1 billion, the price per coin would be $1,000. If the circulating supply increases to 2 million coins and the market cap remains the same, the price per coin would decrease to $500.
Bitcoin Cash maintains a similar issuance schedule to Bitcoin, with a halving of block rewards approximately every four years. This creates a predictable reduction in the rate at which new coins enter circulation, potentially affecting the supply-demand dynamics if market interest remains consistent or grows.
Circulating supply is a key component of tokenomics—the economic model underlying a cryptocurrency. Different projects design their tokenomics with varying approaches to circulating supply. Some cryptocurrencies like Bitcoin and Bitcoin Cash have a fixed maximum supply, creating scarcity. Others might have an unlimited supply with controlled inflation, while some implement deflationary mechanisms that reduce supply over time.
Bitcoin Cash's fixed supply cap of 21 million coins was designed to create digital scarcity, similar to precious metals like gold. This contrasts with fiat currencies, which can be printed without limit by central banks, potentially leading to inflation.
Some cryptocurrencies implement an elastic supply model where the circulating supply automatically adjusts based on certain network parameters like price or transaction volume. This creates a different economic model compared to the fixed-supply approach used by Bitcoin Cash.
Staking-based cryptocurrencies often have a large portion of their supply locked in staking contracts, reducing the effective circulating supply available for trading. This can create different market dynamics compared to pure Proof of Work coins like Bitcoin Cash, where all mined coins are immediately available for circulation.
Transparency around circulating supply is crucial for cryptocurrency investors. Projects that clearly communicate their token issuance schedule, current circulating supply, and any mechanisms that might affect supply (like burns, unlocks, or inflation) allow investors to make more informed decisions. Market data aggregators like CoinMarketCap and CoinGecko track these metrics, though their accuracy depends on the information provided by projects.
Bitcoin Cash's transparent and predictable issuance schedule makes it easier for investors to calculate the current inflation rate and project future supply changes. Currently, approximately 19.5 million out of the maximum 21 million BCH have been mined, with the remaining coins to be issued at a diminishing rate until roughly the year 2140.
Some projects have been criticized for lack of transparency regarding token unlocks or releases that significantly increase circulating supply, causing unexpected dilution for existing token holders. In contrast, the fixed-schedule approach used by Bitcoin Cash provides more predictability.
All terms and definitions may update as the Cryptionary improves.