What does "circulating supply" mean?

Definition of Circulating Supply

1. Circulating supply refers to the total number of tokens or coins that are publicly available and actively trading in the open market.

2. These units are not locked, reserved, or held in developer wallets, foundation treasuries, or other inaccessible addresses.

3. It excludes coins that are burned, staked under long-term lockup mechanisms, or subject to vesting schedules with no immediate liquidity.

4. Exchanges, peer-to-peer platforms, and decentralized trading venues all contribute to the observable movement of these tokens.

5. Market data aggregators derive real-time pricing metrics primarily from trading activity involving circulating supply—not total or max supply.

How Circulating Supply Differs From Total Supply

1. Total supply includes all tokens ever created, including those allocated for team incentives, ecosystem grants, and future airdrops—even if they remain unissued.

2. Circulating supply only counts what is immediately tradable and accessible to external participants.

3. A project may have a total supply of 1 billion tokens but only 300 million in circulation due to scheduled token unlocks.

4. Sudden increases in circulating supply—such as after a major vesting cliff—can exert downward pressure on price if demand does not scale proportionally.

5. Some protocols deliberately delay token releases to stabilize early market dynamics and avoid oversaturation.

Impact on Market Capitalization Calculation

1. Market cap is calculated by multiplying the current price of a token by its circulating supply—not total or max supply.

2. This method reflects actual investor exposure and the effective valuation of live trading units.

3. A low circulating supply combined with high demand can inflate price more rapidly than a high-supply asset under similar conditions.

4. Tokens with artificially constrained circulating supply may show inflated per-unit valuations until additional tokens enter markets.

5. Analysts often compare fully diluted valuation (FDV) alongside market cap to assess long-term dilution risk.

Token Unlock Events and Circulating Supply Adjustments

1. Many Layer 1 blockchains and DeFi protocols schedule quarterly or biannual token unlocks tied to development milestones.

2. Unlock calendars are published on official repositories and tracked by third-party dashboards like TokenUnlocks.app.

3. When large volumes unlock—especially from early investors or insiders—trading volume spikes and volatility intensifies.

4. Some projects implement gradual release mechanisms such as linear vesting over 24 months to smooth out supply shocks.

5. Exchange listings frequently coincide with unlock events, amplifying liquidity and visibility simultaneously.

Frequently Asked Questions

Q: Does circulating supply include tokens held on centralized exchanges?A: Yes. Tokens deposited into exchange hot or cold wallets are considered part of circulating supply unless explicitly frozen or withdrawn from trading pairs.

Q: Can circulating supply decrease?A: Yes. Mechanisms like token burns, permanent locking via smart contracts, or irreversible withdrawal from circulation reduce the count.

Q: Why do some tokens show zero circulating supply on data platforms?A: This occurs when no tokens have been distributed beyond genesis allocations, or when all issued tokens reside in non-transferable, contract-controlled addresses.

Q: Is circulating supply audited regularly?A: Independent blockchain analytics firms like Nansen and Chainalysis track wallet movements, but final circulating supply figures rely on self-reported allocations and on-chain verification by project teams.