Types of token supply and how to analyse them

The decision of what coin or token to buy for long term investment is usually determined by fundamentals.

And one of the elements of a good fundamental analysis is the token's tokenomics.

In this post, we will be discussing an aspect of tokenomics which is "supply" and how to use it to evaluate the investment worthiness of a coin or token.

There are three (3) categories of token supply. These are:

• Maximum supply

• Total supply

• Circulating supply

1. Maximum supply

The maximum supply is the highest number of the token that can ever exist.

For example, BCH has a maximum supply of 21, 000, 000. This limit is usually hard-coded into the blockchain protocol and can't be changed.

A coin or token with a low maximum supply theoretically has a better chance of achieving and maintaining a high value than a coin with a relatively high maximum supply, assuming the demand for both is identical.

Tokens without a fixed maximum supply are usually poor investments for the longterm because demand cannot be infinite.

And given sufficient time, you will begin to lose money as supply overwhelms demand and price begins to adjust downward.

Except of course they implement an equally strong deflationary measure into the tokenomics which makes me question the reason for having an infinite supply in the first place when it can be hard-capped.

Why keep giving birth only to kill the babies to control the population when you can literarily halt childbearing?

My point is, I will be wary of coins or tokens without a fixed maximum supply. I will invest in them cautiously and monitor them closely.

2. Total supply

The total supply of a token is the amount of it that has already been created or minted. It is the amount of the coin that's already in existence.

For example, the current total supply of BCH is 18,697,649 coins out of the maximum supply of 21 million.

The remaining 2.3 million will be created by miners between now and 2040 or thereabout until all 21 million is mined.

It is possible for a coin's maximum and total supply to be the same from the beginning if the developers choose.

For example, the CryptoSorted token (CST) has a maximum and total supply of 21,000 which was created from day one.

Whereas, some coins requires mining or staking to be gradually released until supply reaches maximum or forever if there's no maximum.

3. Circulating supply

The circulating supply is the total number of a token that is in circulation and in public hands.

The difference between the total and circulating supply is what is being held by the project's team Or what is remaining to be mined in the case of BCH for example.

For mining coins like BCH, BTC, ETH, etc, the total and circulating supply is usually the same thing.

However, for pre-mined tokens or coins where the maximum supply has already been created before being sold to the public, the circulating supply is only the amount of the token that has left the hands of the developers and into the hands of the public buyers/investors.

Conclusion

The difference between maximum supply and total supply is the number of coins that's been created and in existence and what is left to be created.

I am invested in only a select few coins without a maximum supply but only because they have a really solid use case and a great team.

Even at that, I am cautious of them and close monitor their performance to know the optimal time to pull out before inflation dilutes the value of my investment.

My ideal coin or token for long term investment is one with a low maximum supply, a great team, and good use case(s) that will sustain demand and potential value increase.

EDIT:

You can find the maximum, total, and circulating supply of most coins on their respective CoinGecko and CoinMarketCap pages. See the BCH coin info page on CMC below.

However, some coins may be missing one or more of the supply information if the platform is unable to verify the supply data.

In such a case, you may want to visit their website, medium page, or Telegram group to find that information.