What is Supply?

Supply = the total amount of a token that exists (or will exist)

Simple Idea:

• More supply → harder for price to go up

• Less supply → easier for price to go up

👉 This is the foundation of pricing

Supply & Price Relationship

Basic principle:

👉 If:

• Demand ↑ and Supply ↓ → Price goes UP

• Supply ↑ and Demand stays → Price goes DOWN

Types of Supply

1. Total Supply

All tokens currently created

2. Circulating Supply

Tokens available in the market

👉 Most important for price

3. Max Supply

Maximum tokens that will ever exist

👉 Example:

• Bitcoin → 21 million max

4. Fully Diluted Supply (FDV)

Total value if ALL tokens are released

👉 Important for long-term analysis

Why Circulating Supply Matters Most

Because:

Only circulating tokens can be traded

👉 Example:

• 1 billion total supply

• 100 million circulating

👉 Real price is based on:

100 million (not 1 billion)

The Hidden Risk: Unlocks

Tokens are often locked:

• Team tokens

• Investor tokens

• Treasury

👉 When they unlock:

• Supply increases

• Price pressure increases

👉 This is why many tokens drop

Inflationary vs Deflationary

Inflationary Tokens

• Supply increases over time

👉 Example:

• Many DeFi tokens

Deflationary Tokens

• Supply decreases over time

👉 Example:

• Ethereum (burn mechanism)

👉 Key idea:

Token Burns

What is burning?

• Tokens are permanently removed

👉 Reduces supply

👉 Can increase scarcity

Real-World Example

Bitcoin

• Fixed supply → scarcity

• No inflation after cap

Ethereum

• Dynamic supply

• Burning reduces supply

👉 Different models = different behaviors

Market Cap vs Supply

Formula:

• Market Cap = Price × Circulating Supply

👉 Important insight:

• Low price ≠ cheap

• High price ≠ expensive

👉 Always check:

Supply + Market Cap

Common Beginner Mistakes

❌ “Low price = good investment”

👉 Example:

• Token price = $0.001

• Supply = 1 trillion

👉 Hard to grow

❌ Ignoring unlock schedules

❌ Not checking FDV

❌ Falling for hype

👉 These lead to bad decisions

How to Evaluate Supply (Simple Framework)

Ask these:

• What is circulating supply?

• What is max supply?

• Are tokens unlocking soon?

• Is it inflationary or deflationary?

👉 This is basic analyst thinking

How This Connects to Your Journey

• Research Analysts → evaluate tokenomics

• Market Analysts → predict price pressure

• DeFi Operators → choose better tokens

Next Step

👉 Continue to:

“Market Cycles (Bull/Bear)”

Optional Mission

👉 Look at any token:

• What is its circulating supply?

• Is more supply coming?

Final Thought