Circulating Supply

What's included and excluded

Circulating supply is meant to capture only tokens that are actually liquid and tradable. It typically excludes:

• Tokens locked in vesting contracts — team allocations, investor allocations, foundation reserves still subject to time-locks.
• Tokens held by the project's treasury — often locked behind multisig governance.
• Tokens permanently burned — sent to dead addresses, no longer recoverable.
• Tokens in escrow contracts — staking, lending positions, etc., depending on the data provider's methodology.

What counts as "circulating" varies between data aggregators (CoinGecko, CoinMarketCap), and definitions evolve over time. The number is close to standardized but not perfectly comparable across sources.

Why it matters

Circulating supply is the multiplier that turns a token's price into market capitalization:

Market Cap = Price × Circulating Supply

A token at $1 with 10 million circulating supply has the same market cap as a token at $10 with 1 million circulating. Per-token price by itself says nothing meaningful about a project's size — only market cap does.

This is the reason that "$0.0001 token must be cheap, it just needs to reach $1" is a basic mistake. To go from $0.0001 to $1 with a 1 trillion supply requires a $1 trillion market cap — larger than Bitcoin's. The math constrains where prices can plausibly go.

Circulating vs. total vs. max supply

Three different supply numbers, often confused:

• Circulating supply — currently in circulation and tradable.
• Total supply — currently in existence (circulating plus locked, but minus burned).
• Max supply — the theoretical maximum that will ever exist.

Bitcoin has all three relatively close together: ~19.7M circulating, ~19.7M total (no significant locks), 21M max. Ethereum has no max supply (it's uncapped), ~120M circulating and total. Many newer tokens have a large gap — perhaps 20% circulating, 100% total, with vesting schedules that gradually convert locked tokens to circulating over years.

The FDV trap

Fully Diluted Valuation (FDV) extends market cap to use max supply rather than circulating:

FDV = Price × Max Supply

Tokens often launch with low circulating supply and high FDV. Early prices are set by trading against limited float; if early excitement pushes the price up, the FDV becomes enormous because most of the supply hasn't unlocked yet. As token unlocks happen, supply enters circulation and pushes prices down — the structural drag of "token unlocks."

Many 2024 launches hit FDVs of $5-50 billion with circulating supplies of just 10-20%. The subsequent unlock schedules created persistent sell pressure that wiped out most of the early gains. Sophisticated investors increasingly look at FDV (and unlock schedules) rather than just market cap.

How to interpret circulating supply

A few practical questions to ask:

• What percentage of total supply is circulating? Very low percentages indicate concentrated insider ownership and pending dilution.
• What's the unlock schedule? Cliff dates and vesting curves drive future circulating-supply growth.
• Is the team transparent? Some projects publish detailed supply spreadsheets; others obscure unlock timing.
• How fast is supply growing? Token emissions for staking rewards or yield farming can dilute holders quickly even after the initial vesting completes.

The cleanest way to reason about a token's price potential isn't "what's the current market cap?" but rather "what would the market cap be at full dilution, and is that reasonable for what this protocol does?"