Overview on Circulating Supply
Last updated
Last updated
The concept of token circulating supply has become a standard metric for comparing and assessing cryptocurrencies among investors, projects, and other market participants, adopted and modified by numerous successors since its first mention in the Bitcoin whitepaper.
Particularly, with the popularization of fundraising through Token Generation Events (TGEs), where a project publishes its whitepaper and records the rights and utilities in the form of tokens, a culture has emerged that involves sharing future plans for phased circulating supply in accordance with the purpose of liquidity provision and the obligations of token circulation.
Xangle highlights the significance of circulating supply within the crypto market as one of the most widely used key metrics, for the following reasons:
To begin, circulating supply plays a pivotal role in protecting investors. This is because the token price of a project, which can be challenging to evaluate, is heavily influenced by supply and demand dynamics. The distribution plan responsible for token supply and its execution are critical aspects that need thorough verification for investor protection.
Furthermore, circulating supply serves as an intermediate indicator of a project's sustainable tokenomics. For instance, if a project releases an excessive number of tokens in the early stages, it can encounter various issues: (1) depleting funds quickly, risking the project's sustainability, (2) failing to retain community interest due to depreciation in token prices, and (3) facing mismanagement from rapid, excessive distribution.
Last but not least, circulating supply is a fundamental element in shaping market capitalization, the primary benchmark for valuation. Any significant alteration in the circulating supply can lead to substantial changes in market capitalization, which is calculated based on the circulating supply, and subsequently impact valuation metrics like PER (Price-to-Earnings Ratio) and PSR (Price-to-Sales Ratio).
Xangle has been consistently producing research on circulating supply, which is one of the most widely used key metrics within the crypto market. For more detailed information on the significance of circulating supply mentioned above, please refer to the research published by Xangle: