total supply

Total supply is an economic concept referring to the total quantity of a given good or service available on the market at a specific time and place. In the context of the crypto assets market, the total supply refers to the overall number of units of a particular cryptocurrency that are available for trading on the market.

What determines the total supply of crypto assets?

The total supply of crypto assets is typically determined by the protocol rules of a specific blockchain. For example, in the case of Bitcoin, the total supply has been set at 21 million coins. This means that there is a limited amount of Bitcoin that will ever be mined and circulated.

How does the total supply impact the value of crypto assets?

The limited total supply of crypto assets often makes them more deflationary than traditional fiat currencies such as the US dollar or the euro. In situations where there is high demand for a particular crypto asset and the available supply is limited, the price of that asset may rise.

A prime example of this is Bitcoin, whose limited supply and increasing demand lead to a steady appreciation in its price since its inception. The supply and demand mechanism thus plays a crucial role in determining the value of crypto assets in the market.

Summary

The total supply of crypto assets is a significant concept that influences their value and functioning in the market. Limited supply can contribute to price hikes of crypto assets, whereas an increase in available supply may have the opposite effect. Understanding the mechanisms governing the total supply is essential for investors and enthusiasts of crypto assets to make informed investment decisions.