Bitcoin is edging closer to reaching its finite, maximum supply, pushing its price up and making it harder to mine. As a rule of thumb, the fewer coins available to the general audience, the higher the value of the cryptocurrency becomes. No more mining is possible when a cryptocurrency reaches its maximum supply. The market price then reflects supply and demand. Bitcoin has a set limit of 21 million coins, the last of which is to be mined around the year 2140 according to a 2017 forecast - with the assumption that the rate of Bitcoin mining halves every four years.
Why are there so many differences in crypto supply?
Cryptocurrency developers can determine whether a coin should have a fixed limit, depending on the blockchain it utilizes or monetary strategies. Ethereum has no maximum supply, meaning miners can create and indefinitely extract this cryptocurrency. This is called an inflationary cryptocurrency, one that continuously inflates the supply. The idea is that the number of tokens in circulation keeps outpacing demand, decreasing overall value. Some coins limit the release of their (indefinite) supply or even destroy (burn) tokens. Such deflationary events took place with LUNA in 2022.
The appeal of low-supply cryptocurrency for investors
Crypto investors tend to be on the lookout for crypto with limited supply, ideally with low levels. After a token reaches maximum supply, the argument goes, the coin's supply becomes static - miners can no longer create new coins. The demand should continue to grow. A maximum cap, they hope, guarantees value gains. Not many such coins exist. DeFi platform AAVE is an example of a cryptocurrency with a max supply smaller than 100 million.
Author: Christopher Malone
Last Updated: 1703130602
Views: 869
Rating: 4.3 / 5 (78 voted)
Reviews: 81% of readers found this page helpful
Name: Christopher Malone
Birthday: 2009-07-11
Address: 350 Morris Villages Suite 077, Mullinsberg, CT 71569
Phone: +3701931111999345
Job: Forensic Scientist
Hobby: Geocaching, Cross-Stitching, Playing Piano, Horseback Riding, Web Development, Table Tennis, Running
Introduction: My name is Christopher Malone, I am a unyielding, venturesome, brilliant, unswerving, radiant, artistic, frank person who loves writing and wants to share my knowledge and understanding with you.