Ethereum Circulating Supply Rises to 100 Million. What Happens to Its Price?
Ethereum, the second most popular cryptocurrency after bitcoin has had its tokens Ether increase to 100 million in the market. The circulating supply of any coin is the maximum amount of coins available for trade at one particular time in the market. This supply determines a coin’s price since it affects the supply and demand of the currency.
According to CoinMarketCap, the circulating supply is the main aspect that should be used to determine a coin’s market capitalization (Market Cap). It is fundamentally wrong to use the total supply of a crypto to determine market cap since locked and reserved coin do not have any significant effect to the market. Locked and reserved coins cannot be traded in the market and thus should not be part of calculating the market cap.
In every market, a change in the circulating supply of any commodity will directly affect its price. If you want to get the best estimate of the price of a given coin or its demand, you should first start by checking its circulating supply. Factors of supply and demand apply in this case in which the lower the circulating supply, the higher the price will be if the demand is high. But if the circulating supply increases, supply of the coin subsequently increases and lowers the price of that coin.
A positive and controlled circulating supply creates confidence in investors who will as a result demand more of that particular coin. This concept begs the question of whether Ethereum increase in its circulation affects its price negatively or positively.
Comparing Ethereum to bitcoin, one can see that this increase in circulating supply is negatively affecting its price. Bitcoin’s current circulating supply is 17 million, and has a market cap of $116 billion, while Ethereum with the circulating supply reaching 100 million is still trailing at a distance $53 billion.
Ether ethusiasts including its founder Vitalic Buterin thinks it’s a positive move towards achieving scalability. Vitalic has hopes that Ethereum network will get to 1 million transactions per second, to rival those of other giant companies like Uber, PayPal and Visa. Currently, the network is only able to process a maximum of six transactions per second.