Total Supply refers to the total number of a cryptocurrency traded in the market. This indicates the amount of a cryptocurrency being offered to the public. Total Supply differs from the maximum supply of a cryptocurrency. The maximum supply specifies the total amount of a cryptocurrency ever produced. The maximum supply is determined by a cryptocurrency's protocol and cannot be changed. Total Supply may change over time.
For example, the maximum supply of Bitcoin is 21 million. This means that a total of 21 million Bitcoins can be mined. But Bitcoin's total supply is not 21 million. Because 21 million Bitcoins have not been mined yet. As of June 2023, the total supply of Bitcoin is approximately 18.7 million. This shows the amount of Bitcoin traded in the market.
Total Supply is used to calculate the market value of a cryptocurrency. Market cap is the price of a cryptocurrency multiplied by its total supply. For example, if the price of Bitcoin is $40,000 and its total supply is 18.7 million, the market cap of Bitcoin is $748 billion.
Total Supply is also important for understanding the supply-demand balance of a cryptocurrency. If the total supply is too high, this indicates that the cryptocurrency may be undervalued. Because there are too many cryptocurrencies in the market and demand decreases. If the total supply is too low, this indicates that the value of the cryptocurrency may be high. Because there is a small amount of cryptocurrencies in the market and demand increases.