Understanding Supply And Demand In Cryptocurrency

As complicated as markets can be when it comes down to it there are only two terms you need to understand, supply and demand. This is really what drives markets and are the two metrics you should understand when looking at coins.

Supply

This is what makes cryptocurrency cryptocurrency. When you go to coinmarketcap.com you will see that circulating supply and total supply are both on the site. The reason for this is both of these numbers are really important. The total supply is the total amount of coins there will be for that coin. This should be the total ever. For example there will never be more than 21 million bitcoins. The circulating supply on the other hand is how many coins are currently minted. This does not mean this is how many coins are literally circulating as a lot of coins get lost or get locked up for various reasons. What this number means is how many coins, in theory, are out there that could be traded.

Supply is very important in crypto as being able to verify how many coins there is what makes the technology special. You are turning a digital good into one with scarcity and how scarce it is can be a big factor on the price of the coin.

Of course no matter how scarce your asset is you will need to have demand if it is going to be worth anything.

Demand

Demand for cryptocurrency should be based on how much utility it has and how popular the sites are that use the coin. The more you can use the coin and the more that the coin is being used the more in theory it should be worth.

When you combine these two things you can start to see markets move. I have seen coins with high supplies that spiralled downward as there were too many coins and not enough use for them all. You need to figure out both of these if you are going to have a successful coin and crypto site.

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