Cryptocurrency traders and investors constantly have to process a lot of information in this new form of trade, to stay on top of it. For instance, you may not be aware that Bitcoin has a cap limit of 21 million. This means that Bitcoin is designed to deflate and there will never be more than 21 million Bitcoins on the market. However, when you consider other tokens in the crypto markets, they are inflationary in nature. This allows for a constant flow of new tokens being introduced to the market.
Cryptocurrencies are meant to follow the principle of demand and supply. Seeing that the demand and supply of the coins and tokens will determine the increase in value, limited supply may be confusing. One may wonder why cryptocurrency investors would want to invest in a coin that has a limited supply. To be able to make sense of this, let us look at some basic terms and what they mean:
Supply: The supply in cryptocurrency refers to the number of tokens of coins that are in circulation in a given period.
Fixed Supply: This is the total number or the maximum amount of coins that can be on the market.
Total Supply: The total supply refers to the total coins that have been mined. This includes those that have been lost and the ones that are no longer in circulation.
Circulating supply: Simply put, these are the number of coins that are currently in circulation.
Circulating Supply and Value of Cryptocurrencies
There is a correlation between the circulating supply and the prevailing value of a cryptocurrency. As mentioned, the largest cryptocurrency in the world, Bitcoin, has a market cap of a maximum supply of 21 million. In a bid to keep up with this form of supply, every 4 years, the value of the mined Bitcoins is reduced by half. Investors need to understand this relationship so as to make the right move. When you purchase a coin that has a limited supply, it means that you are banking on its future value.
When trading on British Bitcoin Profit, it is important to understand the supply and demand metrics of cryptocurrencies. There are many other factors that will affect the value of a digital asset besides its fixed supply. In fact, experts state that investing in cryptocurrencies with a limited supply does not always guarantee great profits in the future. Besides the fixed supply, it is important to check and determine if the coin has a rising demand and also consider the timeframe when the supply will be exhausted.
Before investing in a cryptocurrency coin, you need to ascertain that it has a feasible cycle. For instance, Bitcoin is meant to run until 2140 where the supply will be fully mined. As such, miners will continue getting their rewards until the end. The value and the amount will continue reducing as the end approaches for the coin. In essence, the highest value that Bitcoin will ever carry may be witnessed in the year 2140. Besides Bitcoin, there are other coins and tokens that have a limited or a fixed supply including:
There are so many other coins that are being introduced to the crypto markets and they have so much to offer. It is important to note that even the coins that have infinite supply still hold great value. Ethereum does not have a limited supply and is currently the 2nd biggest cryptocurrency in the world.
The Bottom Line
In conclusion, what you need to understand as a cryptocurrency investor is that coins with limited supply have a higher chance of retaining their value than those with infinite supply. This means that you should consider the type of supply that a crypto has before investing in it.