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Understand the difference between total supply and circulating supply in cryptocurrency
As a growing number of people invest in cryptocurrencies, it is essential to understand the fundamental concepts that support their value and stability. Two key metrics used in cryptocurrency analysis are total supply and circulating supply. While they may seem similar to first sight, there are clear differences between these two terms.
What is total supply?
The total supply refers to the total number of currencies or tokens that will once be created or coined in a particular cryptocurrency. It is the initial amount of money reserved for the creation and distribution of new currencies. In other words, it is the total amount of currency that the project aims to produce.
What is the circulating supply?
The circulating supply, on the other hand, refers to the number of coins or tokens currently in circulation within a specific blockchain network. It represents the amount of money that has been spent and removed from wallets, exchanges and other transactions. In simpler terms, it is the total amount of cryptocurrency that is available for use.
Key differences
To sum up:
* TOTAL SUPPLY: This metric represents the initial assignment of currencies that will be created or agreed.
* Current supply: This metric indicates how many coins are currently used and marketed within a network.
* Relationship: A higher total supply generally means that more coins have been created, but they do not necessarily translate into greater liquidity. On the contrary, a lower circulating offer could indicate a reduced market demand.
Implications of difference
Understanding these differences is crucial for investors, merchants and cryptocurrencies:
- Risk management
: Knowing the difference between total supply and circulating supply can help you evaluate the potential risks associated with each metric.
- Market analysis : A better understanding of total supply and circulating supply can help make more informed investment decisions.
- Transaction volume : Current supply is a key factor that determines the transaction volume, which influences market prices and liquidity.
Conclusion
Cryptocurrency markets are complex systems that require a deep understanding of fundamental concepts such as total supply and circulating supply to navigate effectively. By understanding these differences, you will be better equipped to make informed decisions about your investment strategies and stay at the forefront in the cryptocurrency panorama constantly changing.
