Understanding the finite and unlimited supply of cryptocurrencies

The invention of digital assets is one of the most important technological advancements in the 21st century. With its ground-breaking characteristics, cryptocurrencies have provided seamless, transparent and cost-effective means for people to handle their digital assets. Similar to real-life commodities such as fiat, they also follow economic principles to keep their value in check. For crypto, there are two categories: finite and unlimited.

How does this affect the course of cryptocurrencies and their value in the market? Find out all about it here at BTC Post!

What does supply mean in crypto?

In essence, supply means the total circulation of tokens in the market. Meaning, that if there is a great number of supply then the demand is low. On the other hand, if there’s high demand, then there’s a scarce supply of tokens.

There are different types of supply, check them out below:

Fixed supply – A fixed supply in crypto is the total number of coins mined and released in circulation. Once the blockchain reaches the maximum supply, there won’t be any new tokens minted.
Total supply – The total supply refers to the number or sum of all coins that have been minded including those that are yet to be introduced to the market, lost and are destroyed.
Circulating supply – A circulating supply refers to the total number of cryptocurrencies available for trading in the market. This also covers the current amount of coins used for transactions such as trading and selling.

Fixed and unlimited crypto supply

Cryptocurrencies with a limited supply

Investing in a coin that has a limited supply may seem to be a strange decision for cryptocurrency investors at first glance. Especially since most of these cryptocurrencies are priced at a high value. With a limited supply of crypto, it means that users are only able to mine to such an extent and there is a high chance that gaining such digital currency can be put to an end.

Keep in mind that inventors are finding ways to keep crypto platforms with limited supply active by rewarding miners with incentives for maintaining the blockchain, which is a plan that Bitcoin may do in the near future.

Several cryptocurrencies are limited in supply, check them out below:

Bitcoin (BTC) – when Satoshi Nakomoto invented BTC he ensured that there would only be 21 million tokens available for mining, and 3 million are left. As of writing one BTC costs $43,306.52, and this is considered the most expensive digital currency in the world.

The reason why Bitcoin is so expensive is because of its limited supply. When the whitepaper of BTC was released, the founder, Satoshi Nakamoto, indicated that a cap on the tokens released will keep their value in check.

Since there is a scarce amount of BTC, many people are willing to pay a large sum of money because of its strong performance in the market.

Litecoin (LTC) – The original Bitcoin project was split to create the Litecoin cryptocurrency. With a maximum quantity of 84 million coins, almost 75% of the total supply is already in use.
Cardano (ADA) – The maximum number of available ADA is capped at 45 billion, with 33,752,565,071 ADA already mined, meaning there are only about 11 million available tokens.
Stellar (XLM) Stellar is an open-source, decentralized system for converting digital cash into fiat currency both inside and across countries. Currently, there are about 50 billion available XLM and is priced at $0.20 per token

Is it good to invest in crypto with a limited supply?

The answer depends on the investor’s preference. Usually, a cryptocurrency with limited supply has high value because it has a hard cap and has guaranteed price surges. For example, tokens like Bitcoin have value that increases exponentially over time because of its finite nature. However, not all tokens are subject to this high increase of demand because not all hardcapped digital assets have the same market clamour like BTC.

Cryptocurrencies with unlimited supply

Cryptocurrencies with unlimited supply are called inflationary tokens. Meaning, that there’s no hard cap on the number of coins in circulation. With these types of digital assets, there’s a risk of losing purchasing power as there is no limit to the supply released in the market.

However, cryptocurrencies with unlimited supply mean that users can take advantage of low priced digital currencies as there is more purchasing capacity. The only factor here to remember is that the demand may not be as high as those with limited supply since most people can afford it.

Different cryptocurrencies are unlimited in supply. Check them all out below:

Ethereum (ETH) – Ethereum has an unlimited amount of ETH in circulation. However, to avoid having such a high number of available coins, the Ethereum platform limits the number of tokens that can be mined each year.
Dogecoin (DOGE) – Dogecoin is an open-source and free to use currency that first started as a meme but gained popularity and respect in the crypto community. Currently is priced at $0.14 per DOGE with an unlimited supply in circulation.
USD Coin (USDC) – USD Coin is a digital currency based on the United States dollar. Dollars may be exchanged for USDC tokens at any moment over the internet and on public blockchains thanks to the USD Coin initiative. It’s currently priced at 0.9992 per USDC.

Unlimited vs limited crypto supply: Which is better?

It’s best to know the amount of supply available for the type of digital currency you want since you will be able to gauge whether that specific token suits your wants and needs.

There are thousands of digital currencies out there that are limited and unlimited in supply, and choosing which one to invest and trade in primarily depends on how much you are willing to risk.