Often when we read about cryptocurrencies, we read the description of the project, we look at the website, and we might even read about the team behind the project. But, many of us don't think much about words such as circulating supply and max supply. But, in this short article, I will let you know more about why these are important numbers to look at using the example of StrongBlock. You can find StrongBlock on Coinmarketcap right here.
10,000,000 tokens or 500,000 tokens - it does matter!
StrongBlock launched in September 2020 and it had a total supply of 10,000,000 tokens. Then they decided to do a giant burn, which lowered the total supply to approximately 500,000. Now, that is a big difference, and as an investor, this is important to understand. Do you know why?
First of all, if we look at Bitcoin, it has a max supply of 21,000,000 tokens, and the price has reached approximately 60,000 USD. Of course, StrongBlock cannot be compared to Bitcoin, but it is just worth looking at those numbers. There are 40x more Bitcoin tokens than StrongBlock tokens. What does this mean? It means that if people start to get interested in this token, it will cause scarcity...
What is scarcity?
Can you imagine that you enter a grocery market looking for toilet paper during the COVID breakout in March-April 2020? It was scarcity! People were running to get hold of a bag of toilet paper, and some even paid more, just to be able to clean their butt after finishing their important matters at the toilet. That is scarcity!
On the other hand, a project with more than 1,000,000,000 tokens will never reach prices like that of Bitcoin, simply because there are way too many tokens. As a result, you need to keep your expectations in the right place.
How does this influence me in real life?
I remember buying some StrongBlock tokens in January 2021. The price was $25 at that time (now it is $150). But, after I bought the tokens, the price fell to $17 and I felt quite stupid. But, I was also quite relaxed. Do you know why? There are so few tokens, that if the price would fall more, any big whale could just move in and buy all of it. It is impossible for a token with scarcity to fall to zero (unless it is a scam project or so on), because there are few tokens and people will just start buying all of them as the prices fall.
As a result, I didn't fear my StrongBlock investment much, even as the prices fell, because I knew that it wouldn't be going to zero no matter what. And since I also had great faith in the team and the project, I was actually just really happy about it, even on red days.
These were just some thoughts from me concerning understanding the importance of circulating supply and max supply when you invest and learn more about crypto projects.
I hope you have found it interesting!