Circulating supply counts the number of tokens currently available for trading in the market, excluding locked allocations, unvested team tokens, foundation reserves, and tokens permanently removed through burns. This matters because only circulating tokens can actually be bought or sold, making it the relevant denominator for market cap calculations. Total supply includes all existing tokens regardless of restrictions; maximum supply caps the tokens that will ever exist (21 million for Bitcoin, potentially infinite for Ethereum post-merge though deflationary in practice). Supply dynamics directly affect price: if 90% of tokens are locked and 50% unlock next month, massive sell pressure looms regardless of current market conditions. Understanding the unlock schedule matters for any investment thesis. Projects manipulate supply perception through complex vesting and lock structures that technically don't count as circulating but effectively enter the market through derivatives or lending. Token burns reduce circulating supply permanently, while inflationary emissions increase it. Comparing circulating supply to maximum supply indicates potential future dilution. A project with 10% of supply circulating has 90% left to distribute, creating substantial future sell pressure that current prices may not reflect.
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