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title: What is Circulating Supply in Cryptocurrency? A Beginner’s Guide

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# **What is Circulating Supply in Cryptocurrency? A Beginner’s Guide**
![circulating supply](https://hackmd.io/_uploads/HyvVM4RRkx.jpg)

Cryptocurrencies have introduced a new world of finance, but for beginners, understanding the basic terms can be confusing. One of the most important concepts you’ll often hear about—especially when researching coins or checking market rankings—is **circulating supply**.

In this beginner’s guide, we’ll break down what circulating supply means in cryptocurrency, why it’s important, and how it affects a coin’s market behavior and valuation.

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### **Understanding Circulating Supply**

**Circulating supply** refers to the number of cryptocurrency coins or tokens that are **currently available and actively circulating in the market**. These are coins that are accessible to the public, whether through exchanges, wallets, or other forms of trading.

In simple terms:
- **Circulating supply = Total number of coins in public hands right now.**

It excludes coins that are locked, reserved, or otherwise unavailable to regular users. Coins held by project founders, locked for future development, or reserved in smart contracts might not be counted in the circulating supply until they are released.

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### **Circulating Supply vs. Total Supply vs. Max Supply**

To fully understand circulating supply, it’s important to distinguish it from two related terms:

- **Total Supply:**  
  The total number of coins that currently exist, including those that are locked or not yet available for public trading.

- **Max Supply:**  
  The maximum number of coins that will ever exist for a cryptocurrency. This is a fixed limit set by the project’s code (for example, Bitcoin has a max supply of 21 million coins).

Think of it this way:
- Circulating supply = Available to trade now.
- Total supply = Circulating + locked/held coins.
- Max supply = Hard cap, ultimate limit.

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### **Why Circulating Supply Matters**

#### 1. **Determines Market Capitalization**

Market capitalization is a key metric used to compare the size of different cryptocurrencies. It’s calculated by multiplying the **current price per coin** by the **circulating supply**:

**Market Cap = Circulating Supply × Current Price**

For example, if a cryptocurrency has a circulating supply of 10 million coins and each coin is worth $5, its market cap would be $50 million.

✅ *Tip:* When you see rankings of cryptocurrencies by size (like on CoinMarketCap or CoinGecko), they are ranked by market capitalization based on circulating supply—not total or max supply.

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#### 2. **Impacts Price and Perceived Scarcity**

Circulating supply affects a coin’s **price dynamics**. Generally, if the demand for a coin stays constant but its circulating supply increases, the price may decrease because more coins are available. Conversely, if the circulating supply is low and demand rises, scarcity can drive the price up.

This is why some projects implement **token burns** (permanently removing coins from circulation) to decrease supply and potentially increase value.

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#### 3. **Helps Assess Real Value**

When evaluating a cryptocurrency, knowing the circulating supply helps investors assess its **real market value** and not just be misled by the current price per coin. A coin priced at $0.10 might seem cheap, but if it has billions of coins in circulation, its market cap could already be enormous.

✅ *Tip:* Always compare market capitalization instead of just looking at coin price when evaluating cryptocurrencies.

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### **Things to Watch Out For**

- **Supply Manipulation:** Some projects may initially limit circulating supply to create artificial scarcity and drive prices up, only to release more coins later, causing price drops.
- **Inflationary Models:** Some cryptocurrencies continually add new coins through mining or staking rewards, meaning their circulating supply grows over time, potentially affecting future prices.

Understanding a project’s emission schedule and tokenomics (economic model) is crucial before investing.

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### **Conclusion**

**[Circulating supply](https://indiacryptoresearch.co.in/icr-score)** is a fundamental concept in the world of cryptocurrency. It plays a major role in determining a coin’s market cap, affects its price movements, and offers important insights into its potential value. 

As a beginner, always take time to study the circulating supply of any cryptocurrency you are considering. It’s not just about how cheap or expensive a coin appears—it’s about understanding the bigger picture of supply, demand, and long-term value.

Armed with this knowledge, you’re one step closer to making smarter, more informed crypto investment decisions!