Investing 101

Understanding a cryptocurrency’s supply - how many coins flow around an economy - is crucial to determine the coin’s market capitalization, demand and hence value. However, circulating supply is different from maximum and total supply. 

Circulating supply (as the name suggests) defines how many units of the coin are circulating around the market at any given point. For example, bitcoin currently has ~19 million coins in circulation. Essentially, this number only includes coins which are on the blockchain and can be freely traded between wallets. 

Total supply refers to the total number of coins that exist on the blockchain including ones that are not currently in circulation. When a crypto project launches a new coin, they usually create more coins than they initially distribute. However, total supply does not include coins which have been burned (or, in lack of a better term, lost). 

Lastly, the maximum supply of a crypto refers to the maximum amount of coins that can ever be minted. For example, Bitcoin’s maximum supply is capped at 21 million. Once this cap is hit, no more bitcoins can be mined. Some coins like Ethereum, however, don’t have a maximum supply but they have a limit on the maximum amount of coins that can be mined in a day. 

Native in crypto terms means the coin inherent to a blockchain. For example ETH is native to the Ethereum blockchain, which then is used to host many other currencies. Native Supply is the supply on a blockchain of the native coin.

High supply is generally considered bearish, insofar as more units on offer can depress prices whereas low supply is generally considered bullish, insofar as more units on offer can cause prices to rise. 

The number of new units issued indicates the level of supply: a high value means a high supply and a low value means low supply. Rather than the number of units, this can also be expressed in terms of the dollar value. The number of units transacted in a period also indicates the level of supply: A high level showcases a high volume of activity and indirectly correlates to high supply from miner liquidation, while a low level showcases a low volume of activity and indirectly correlates to reduced supply from miner liquidation.


Understanding supply is crucial to determine the coin’s market capitalization, demand and hence value

Supply

Crypto Indicators

The USD sum value of all the coins that have been mined for a specific cryptocurrency. It’s computed as current supply * priceUSD and based on the daily close price

Market capitalization can be considered a rough gauge for how stable a coin is likely to be - a larger market cap is more likely to be a more stable investment than one with a much smaller market cap. Moreover smaller cap coins are more susceptible to turbulent markets and can see huge gains or losses in such periods. 

There are 3 classifications of crypto currencies by market capitalization: 
1. Large-cap: coins with a market capitalization > $10 billion. Investors consider these to be lower risk investment because they have a sustainable record of growth and higher liquidity 
2. Mid-cap: coins with a market capitalization between $1 billion and $10 billion. These  coins are considered to have more untapped potential upside but also come with higher risk 
3. Small-cap: coins with a market capitalization of less than $1 billion. Such coins are most immune to dramatic price swings in turbulent markets. 

A free-float market cap is the total value of the cryptocurrency, excluding units that are not trading (e.g. lost or locked). Similar to regular market cap, a locally high market cap shows healthy activity and that the overall value of the coin is close to its local highs. A locally low market cap shows the overall value of the coin is depressed


Capitalization

Supply