Circulating supply refers to the total number of units of a cryptocurrency that are currently available and can be actively traded in the market. This does not include coins that are locked, reserved, or yet to be mined. It gives a good indication of the liquidity and distribution of a cryptocurrency. Here's a bit more detail:
- Active in Market: Circulating supply includes all the coins that are accessible and tradable in the cryptocurrency market.
- Excludes Locked Coins: Coins that are locked due to vesting schedules, being held in reserves, or for other purposes, are not included in the circulating supply.
- Dynamic Nature: The circulating supply can change over time. For instance, with cryptocurrencies that mine new coins, the circulating supply increases as more coins are mined. Conversely, when coins are burned (permanently removed from circulation), the circulating supply decreases.
- Importance: The circulating supply is a crucial metric because it helps determine the cryptocurrency's market capitalization, calculated by multiplying the circulating supply by the current price of the cryptocurrency.
Understanding the circulating supply is essential for analyzing the overall adoption, liquidity, and price movements in a cryptocurrency market.