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1. Beginner Course

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  1. 1. What are these cryptocurrencies?
  2. 2. Bitcoin - the story of a technological revolution
  3. 3. Satoshi Nakamoto, who is the creator of Bitcoin?
  4. 4. Vitaly Buterin – the creator of Ethereum
  5. 5. What is Blockchain, and how does it work?
  6. 6. What is an NFT token?
  7. 7. What is money?
  8. 8. Cryptocurrencies vs fiat money, which will win?
  9. 9. What is DeFi (Decentralized Finance)?
  10. 10. DeFi: opportunities, advantages and disadvantages of decentralized finance
  11. 11. What is an altcoin?
  12. 12. Stablecoins - What are they?
  13. 13. Cryptocurrency wallet - what is it?
  14. 14. Why do we talk about bull and bear markets?
  15. 15. Security in the crypto market - what rules are worth following?
  16. 16. What is the seed phrase in cryptocurrencies?
  17. 17. Dogecoin and memecoin - what are they?
  18. 18. What is a Ponzi scheme?
  19. 19. What is a Soft and Hard Fork?
  20. 20. Blockchain - examples of use
  21. 21. Is blockchain safe?
  22. 22. Smart Contracts - what are they?
  23. 23. What is Ethereum? 
  24. 24. Liquidity in the cryptocurrency market
  25. 25. What is cryptocurrency mining?
  26. 26. What is the mining difficulty?
  27. 27. Inflation and its effects on financial markets
  28. 28. What is compound interest, and how does it work?
  29. 29. Cryptocurrency wallet diversification
  30. 30. Blockchain and NFT games - how to make money on them?
  31. 31. Decentralized Apps – what are they?
  32. 32. What is Proof of Work (PoW) and what is Proof of Stake (PoS)?
  33. 33. What is Proof of Burn (PoB)?
  34. 34. What is the Proof of Authority (PoA) consensus mechanism?
  35. 35. What Are Privacy Coins and Are They Legal?
  36. 36. What is CBDC - central bank digital money?
  37. 37. What is Cryptocurrency Airdrop all about?
  38. 38. What are the types of blockchain networks?
  39. 39. Key differences between ICO, IEO and STO
  40. 40. What is IoT - the Internet of Things?
  41. 41. What is the difference between Circulating Supply and Total Supply?
  42. 42. Everything you need to know about gas fees in Ethereum!
  43. 43. The most important cryptocurrency acronyms/slang you need to know!
  44. 44. Halving Bitcoin - what is it, and how does it affect the price?
  45. 45. What is the Fear and Greed index for cryptocurrencies?
  46. 46. APR versus APY: what is the difference?
  47. 47. Snapshot from the world of cryptocurrencies - what is it?
  48. 48. Know your customer (KYC) and Anti-money laundering (AML) what are they in the cryptocurrency industry?
  49. 49. What is a whitepaper? What is its purpose, and how do you write it?
  50. 50. How do you transfer cryptocurrencies?
  51. 51. What is EURT? How does it work?
  52. 52. What is an Initial Farming Offer (IFO)?
  53. 53. What is Regenerative Finance (ReFi)?
  54. 54. Bitcoin Pizza Day
  55. 55. What Is Stagflation and Why Does It Have a Negative Impact on the Market?
  56. 56. What are decentralized DAO organizations, and how do they work? What are DAO tokens?
  57. 57. CyberPunks - the story of the most popular NFT collection in the crypto industry!
  58. 58. Michael Saylor, Self-Proclaimed Bitcoin Maximalist
  59. 59. AI blockchain - a new look into the future?
  60. 60. The Bored Ape Yacht Club (BAYC) - the story of the popular NFT collection!
  61. 61. Who is Changpeng Zhao, CEO of Binance?
  62. 62. What is blockchain network congestion, and how does it work?
  63. 63. Azuki NFT collection guide: everything you need to know about it!
  64. 64. Who Is Craig Wright, the Alleged Creator of Bitcoin?
  65. 65. What Is Bitcoin (BTC.D) Dominance?
  66. 66. What is WorldCoin? Everything you need to know about this cryptocurrency!
  67. 67. Who is Brian Armstrong - CEO of Coinbase?
  68. 68. The 10 most expensive non-fungible tokens (NFTs) ever!
  69. 69. Web3's most popular social media platforms! Will they replace the platforms we know?
  70. 70. Cryptocurrency wallets: Hot Wallet vs. Cold Wallet - key differences!
  71. 71. Gavin Wood: Blockchain Visionary and Co-Founder of Ethereum
  72. 72. The memecoin story: madness or great investment?
  73. 73. Blockchain versus databases: key differences!
  74. 74. NFT Art: The digital art revolution - history and examples!
  75. 75. Who is Galy Gensler and the SEC? How does the Securities and Exchange Commission (SEC) affect the cryptocurrency market?
  76. 76. On-chain analysis in the cryptocurrency world: Everything you need to know about It
  77. 77. What are utility tokens and what use do they have in the cryptocurrency sector?
  78. 78. Can you pass on your cryptocurrencies after death? How do you pass on a cryptocurrency inheritance?
Lesson 41 of 78
In Progress

41. What is the difference between Circulating Supply and Total Supply?

Investing in cryptocurrencies is not an easy undertaking. It requires diligence, patience and above all, basic knowledge of fundamental analysis and markets. Any self-respecting trader should pay attention to the circulation and total supply of the coin they want to invest in. In the cryptocurrency world, this is called tokenomics. It is directly related to market capital.

The more digital assets are put into circulation, the more their value will fall. And of course, the reverse is true: the more coins are burned or taken off the market, the higher their value will be.

In today’s lesson, we will discuss the supply that influences the prices of cryptocurrencies, and we will mention what to do during the fundamental analysis of a particular project. After today’s article, you will already know very well what to look for in your cryptocurrency investments!

Circulating Supply – what is it?

Circulating Supply is the current number of coins in circulation on the blockchain. For Bitcoin, the circulating supply will be 19 million and for Ethereum, 121 million.

Circulating Supply is always a percentage of the total supply. The higher the percentage, the better. Bitcoin’s circulating supply of 19 million is about 90% of the maximum supply, which is 21 million. What does this mean? That the value of bitcoin cannot be significantly reduced by the influx of new coins on the market.

Let us look at another example. If the total supply of a particular cryptocurrency is 5 million and its supply is 100 million, then the circulating supply is 5%. Then it is very risky for the project because the influx of new coins can effectively “dilute” the market.

That sounds a bit scary. However, you have nothing to fear. The amount in circulation can easily be calculated with a simple mathematical formula…:

Market Cap / Cryptocurrency Price = Circulating Supply

How does Circulating Supply affect the price of cryptocurrencies?

Many inexperienced traders who are not enrolled at our university often assume that it is worth investing in a particular cryptocurrency if the price is high. This is not so wrong – although there are of course exceptions to this rule. For an experienced trader, a high price of a certain cryptocurrency more or less means that the circulating supply is low.

However, let’s look at the example of Ethereum. The circulating supply of Ethereum is higher than that of Bitcoin. This impacts its price, which is usually lower than that of our flagship cryptocurrency.

Now let’s look at this example from the other side. When the price of a particular cryptocurrency is low, many people assume that the project associated with it is not worth anything. In reality, however, the supply is not high either. A good example of this is the well-known Memecoin – Shiba Inu. Its Circulating Supply is 550 million, and its price is only $0.00001230 at the time of writing. Despite this, it manages to keep its market capitalization at a relatively high level of around $6 billion.

Does burning cryptocurrencies affect the Circulating Supply?

Burning a certain amount of cryptocurrency can impact the price by reducing the number of coins in circulation. We have written here about how cryptocurrency burning works and what it entails.

Burning cryptocurrencies is nothing more than taking them out of circulation by sending them to the wallet address that performs this activity. Again, we will use Shiba Inu – thanks to this process, the project has effectively reduced its supply, which has contributed to its success.

Investment Decisions vs Circulating Supply

Before investing in a cryptocurrency or crypto project, you should check the ratio between the circulating supply and the total supply. If more than 80% of the coins are in circulation, things are going downhill. Seriously consider another investment.

The same applies if less than 50% of the coins are in circulation. Then there is a risk that suddenly more of that cryptocurrency will flood into the market, and it will lose value.

Also remember that the market capitalization does not always increase when the circulating supply increases. When you invest, remember one important thing: make sure that the project you have invested in does not have less than 50% of the circulating supply. The price can rise in a short time, while a rapid influx of coins into the market can reduce your potential profits.

Total Supply – definition

You have already guessed that the total supply is the total supply of coins in circulation. Simply put, it is the total coins minted or issued minus the coins burnt/destroyed. In addition, coins that can be traded are also included in the total supply.

The total supply includes both coins in circulation and coins that have yet to enter the market. Note that the total supply cannot be used to determine the market capitalization of a particular cryptocurrency.

Circulating Supply vs. Total Supply

Circulating supply is clearly different from total supply. Circulating supply is all the coins that are active on the blockchain. Let’s look at Satoshi Nakamoto. He owns 1 million BTC. Even though the coins have not been moved for more than 10 years, they are still considered part of the circulating supply.

A good example of the total supply is Terra (LUNA). Its sudden growth led to its collapse. To launch the new stablecoin UST, the Terra team had to start minting new tokens – LUNA. All to support UST. The total supply of LUNA suddenly went from 300 million to 6.5 trillion in just a few days. The effect? A drop in the price of LUNA from about $80 to about $0.0001. And all because the project was devalued by the increase in supply.

Again, we have an interesting fact for you. The inflation risk is relatively high for DeFi coins based on smart contracts.

Summary

So, you can see that circulating supply and total supply are two key components that influence the price of a given cryptocurrency. Thanks to them, you as an investor can analyse the project and predict the rise or fall of the price of a particular coin.

Knowing how to invest based on the circulating supply is a great lesson, especially for inexperienced traders.