What Is Max Supply?
Also known as: Maximum Supply, Supply Cap, Coin Supply Cap, Hard Cap
In short
Max supply is the highest number of units of a cryptocurrency or token that can ever exist under the protocol's rules; for example, Bitcoin's max supply is capped at 21 million BTC.
In cryptocurrency markets, three supply concepts are usually used together. Circulating supply refers to the amount currently freely tradable on the market; total supply refers to all units minted and not burned, including locked ones; and max supply refers to the upper limit, including what may be minted in the future. This distinction is important when assessing an asset's scarcity and the amount that may come to market in the future. Fully diluted valuation (FDV) is also usually calculated by multiplying the price by the max supply.
Not every cryptocurrency has a max supply. On networks such as Bitcoin and Litecoin, the cap is written into the protocol and new coin production gradually decreases with halvings. On networks such as Ethereum and Dogecoin, there is no fixed cap; on Ethereum, the burning of part of transaction fees with EIP-1559 affects net supply.
Max supply alone does not tell you about an asset's value. In some projects, the cap can be changed through a governance decision or a smart contract upgrade. Also, in projects where circulating supply is low relative to max supply, tokens that come to market in the future can create selling pressure on the price.
Last updated: · This content is for information purposes only and is not investment advice.