When someone says a token is "undervalued," they're making a claim about price relative to market capitalization—a calculation that depends entirely on circulating supply. When a project announces an airdrop or major unlock, the excitement or concern hinges on how that event changes circulating supply. Yet circulating supply remains one of the most misunderstood metrics in crypto, creating confusion that leads to poor investment decisions and misleading price comparisons.
A token priced at $0.01 isn't necessarily cheaper than one priced at $100. The difference lies in supply. Understanding circulating supply, total supply, max supply, market cap, and fully diluted valuation (FDV) transforms how you evaluate tokens. This guide explains each metric clearly, shows where supply numbers originate, teaches you how to verify them on-chain, and highlights common traps that catch beginners off guard.
Why Supply Numbers Confuse Everyone: The Problem With "Circulating"
Most crypto dashboards display circulating supply prominently, but few explain what "circulating" actually means. The term suggests tokens actively trading in markets, yet the boundary between "circulating" and "locked" is murky. A token held in a developer's multisig wallet isn't technically circulating, but if that wallet can move funds at any moment, is it truly locked? What about tokens in vesting contracts that unlock next month? Or exchange wallets holding customer deposits?
This ambiguity creates three common problems. First, aggregators like CoinMarketCap and CoinGecko sometimes disagree on circulating supply for the same token because they apply different methodologies for excluding locked tokens. Second, projects occasionally misreport circulating supply to inflate their market cap rankings, making tokens appear more valuable than they are. Third, beginners compare tokens by price alone without considering supply, leading to flawed valuation conclusions.
The confusion intensifies when you introduce related metrics. Total supply measures all tokens that exist right now, including locked ones. Max supply shows the absolute ceiling under protocol rules. Market cap multiplies price by circulating supply. FDV multiplies price by max supply, showing theoretical value if all future tokens existed today. Each metric serves a different analytical purpose, but understanding how they relate requires clarity on the foundation: circulating supply.
Core Definitions: Circulating, Total, and Max Supply
Circulating supply represents tokens currently available in markets and accessible for trading. This excludes tokens locked in vesting contracts, held in protocol treasuries, permanently burned, or otherwise inaccessible to the public. When you see a token's market cap calculation, circulating supply is the denominator that determines how many tokens trade at the current price.
Total supply counts all tokens that currently exist, including circulating tokens plus any that are locked, reserved, staked, or held by developers. Total supply changes when new tokens are minted through mining, staking rewards, or protocol emissions. It also changes when tokens are permanently burned by sending them to addresses from which they cannot be recovered. Total supply never exceeds max supply.
Max supply defines the absolute hard cap—the maximum number of tokens that will ever exist under the protocol's rules. Bitcoin has a max supply of 21 million coins hardcoded into its consensus mechanism. Ethereum has no fixed max supply, meaning it can theoretically mint tokens indefinitely. For any new token, max supply is set by smart contract logic and may be fixed or unlimited. Understanding max supply helps you assess long-term dilution risk because it shows how much additional supply could eventually enter markets.
The relationship between these three metrics follows a clear hierarchy. Circulating supply is always less than or equal to total supply, and total supply is always less than or equal to max supply. The gap between circulating and max supply indicates future dilution potential—tokens not yet minted or released that could eventually reach markets.
Calculation Formula:
Circulating Supply = Total Supply − Locked Tokens − Burned Tokens − Reserved HoldingsThis formula requires judgment because determining what counts as "locked" or "reserved" involves interpreting on-chain data and project disclosures. A token in a time-locked vesting contract is clearly not circulating. A token in a DAO treasury that could be released by governance vote occupies a gray area.
Market Cap vs FDV: What Each Measures and When It Matters
Market capitalization measures the current total value of all circulating tokens at present price. The formula is straightforward:
Market Cap = Circulating Supply × Current PriceMarket cap provides a snapshot of a token's size relative to others. Bitcoin with a $975 billion market cap dwarfs most altcoins, reflecting its dominant position. Comparing market caps across tokens helps you understand relative scale, but market cap alone doesn't reveal dilution risk or future supply inflation.
Fully diluted valuation (FDV) shows theoretical value if all tokens that could ever exist were minted and held at today's price:
FDV = Max Supply × Current PriceWhen max supply is undefined (like Ethereum), FDV calculations use total supply instead. FDV represents maximum potential dilution assuming no price change as supply inflates. The gap between FDV and market cap signals how much additional supply could eventually reach markets.
A token with $10 million market cap and $1 billion FDV faces massive future dilution. If circulating supply increases 100x while price stays flat, each holder's stake dilutes proportionally. Conversely, when market cap and FDV are close (like Bitcoin's 7.7% gap), almost all potential dilution has already occurred. The token has matured, and future supply inflation will be minimal.
Understanding the FDV gap matters most during launch phases. New tokens often start with 5-20% of max supply circulating, creating FDV gaps of 5-20x. This structure seeds liquidity and rewards early participants, but it also signals substantial dilution ahead. Projects with transparent vesting schedules and credible utility can manage this dilution if demand scales faster than supply. Projects with opaque schedules or weak fundamentals typically see price collapse as supply inflates.
Where Supply Data Comes From: Explorers vs Aggregators
Circulating supply data originates from three sources: on-chain smart contracts, aggregator methodologies, and project disclosures. Each source provides different perspectives on what counts as circulating.
Block explorers like Etherscan or Blockscout for Base read supply data directly from smart contracts. Every ERC-20 token includes a totalSupply() function that returns the number of tokens minted so far. This on-chain number represents total supply with absolute precision—it's cryptographically verified and cannot be manipulated without changing the contract itself. However, totalSupply() doesn't distinguish between circulating and locked tokens. You see the total, not the breakdown.
To calculate circulating supply from on-chain data, you must identify which addresses hold locked tokens. Look at the top holders list on Etherscan. Addresses labeled as vesting contracts, multisig wallets, or known treasury addresses likely hold non-circulating tokens. Subtract those balances from totalSupply() to estimate circulating supply. This manual process is accurate but time-consuming, which is why most people rely on aggregators.
Aggregators like CoinMarketCap and CoinGecko compile supply data from multiple sources and apply proprietary methodologies to determine circulating supply. They consider project disclosures, vesting schedules, treasury holdings, and sometimes exclude large exchange wallets. Aggregators provide convenience and updated numbers, but their methodologies aren't fully transparent. Two aggregators may show different circulating supply for the same token because they make different judgment calls about what qualifies as locked.
Discrepancies between aggregators typically arise in three situations. First, a project recently completed a vesting unlock not yet reflected in aggregator feeds, creating temporary lag. Second, debate exists over whether a multisig or DAO treasury holding should count as circulating—some aggregators exclude it, others include it. Third, a major exchange wallet balance is miscategorized because the aggregator doesn't have access to the exchange's internal accounting.
For tokens you're evaluating seriously, verify supply data on-chain rather than trusting dashboards blindly. Aggregators are useful for quick checks, but they can lag reality by hours or days during critical events like major unlocks.
How Supply Changes Over Time: Emissions, Burns, Mints, and Buybacks
Circulating supply is not static. Four mechanisms drive change over time, and understanding these dynamics helps you anticipate future supply inflation or deflation.
New Minting and Emissions
Most blockchains and tokens mint new supply through protocol-defined schedules. Bitcoin creates approximately 6.25 BTC every 10 minutes (as of the 2024 halving), rewarding miners for securing the network. Ethereum creates new ETH through proof-of-stake validation rewards, issuing around 13,000 ETH daily to validators. Governance tokens like Uniswap or Aerodrome mint new tokens to reward liquidity providers, incentivizing participation in the protocol.
Emissions increase total supply and circulating supply simultaneously unless newly minted tokens are locked immediately. The rate of emissions determines inflation pressure. A token minting 10% of circulating supply annually faces consistent dilution unless demand grows faster than supply.
Vesting Unlocks
Tokens locked under time-based contracts automatically move from reserved to circulating as vesting milestones pass. A startup with 50 million tokens in a four-year vesting schedule will see 12.5 million move to circulating every year, increasing supply by 25% annually if no other mechanisms offset it.
Vesting schedules typically include cliffs—periods where no tokens release—followed by linear or periodic unlocks. A one-year cliff means zero tokens release for 12 months, then unlocking begins. The cliff signals long-term commitment from team members or early investors. After the cliff, tokens unlock monthly or quarterly, gradually increasing circulating supply.
Large vesting unlocks create predictable downward price pressure because supply increases while demand remains constant or declines. Savvy traders watch unlock calendars and anticipate volatility around these dates.
Token Burns
Burns permanently remove tokens from circulation by sending them to addresses from which they cannot be recovered. The most common burn address is 0x0000000000000000000000000000000000000000, sometimes called the "zero address" or "dead address." Tokens sent here are provably unrecoverable because no private key can access them.
Burning reduces total supply and circulating supply, creating deflationary pressure. Some protocols (like Ethereum post-EIP-1559) burn transaction fees automatically. Others conduct periodic buyback-and-burn programs where the protocol repurchases tokens from markets and destroys them. Burning signals long-term commitment to reducing dilution, though its effectiveness depends on burn rate relative to minting rate.
Buybacks and Lockups
Projects sometimes repurchase their own tokens from markets and lock them in treasury contracts, temporarily reducing circulating supply. This only works if circulating supply was inflated initially and the lockup is genuinely time-bound or permanent. If a project can unlock treasury tokens at will, the buyback provides minimal long-term benefit because tokens could re-enter circulation anytime.
The net effect of these four mechanisms determines whether a token is inflationary, deflationary, or stable over time. Ethereum sometimes experiences brief deflationary periods when EIP-1559 burns exceed proof-of-stake issuance during high transaction activity. Most tokens remain inflationary for years as emissions schedules run their course before stabilizing.
Unlocks and Vesting: Cliffs, Schedules, and Their Impact on Price Perception
Vesting schedules govern when locked tokens become circulating. Understanding vesting mechanics helps you anticipate supply inflation and price movements around unlock events.
A cliff represents a locked period where zero tokens release. If a team has a one-year cliff followed by three years of linear vesting, no tokens unlock for 12 months. After month 12, tokens begin releasing monthly. Cliffs demonstrate long-term commitment—team members or investors can't immediately dump tokens on markets after launch.
Linear vesting distributes tokens evenly over time. If 24 million tokens vest linearly over four years, 500,000 release monthly. Linear vesting creates predictable, steady supply increases that are easier for markets to absorb than sudden large unlocks.
Periodic unlocks release tokens in batches at scheduled intervals rather than continuously. Quarterly unlocks dump three months' worth of tokens into circulation at once, creating volatility spikes. Monthly unlocks spread the impact more evenly.
The signaling effect of vesting schedules matters as much as the mechanics. A team with a four-year vesting schedule signals confidence in long-term success—they're locking their own tokens for years. A team with a six-month schedule or no vesting at all signals short-term thinking and potential dump risk.
Markets anticipate unlock events. Even though locked tokens don't immediately dilute circulating supply, investors price in future dilution today. If a project has a massive four-year vesting schedule of team tokens, the market discounts the token's price now because future supply inflation is certain. The announcement of steep upcoming unlocks can trigger immediate selling pressure as holders front-run the event.
Float vs Circulating Supply: What's Actually Tradable Right Now
Circulating supply includes all tokens not explicitly locked, but it doesn't account for holder concentration or liquidity. Float refines this concept by measuring tokens actually available for trading in practice.
If a token has 100 million circulating supply but 90 million are held by 10 addresses (founders, VCs, or protocol treasuries), only 10 million constitute the float—tokens likely to trade in the near term. Float is almost always smaller than circulating supply, sometimes dramatically so for newly launched tokens with concentrated ownership.
Float matters because it affects liquidity and volatility. A token with high circulating supply but low float can experience wild price swings from small buy or sell orders because so few tokens are actually trading. This creates manipulation risk—large holders can move prices easily by buying or selling small amounts relative to their holdings.
Emerging platforms like Messari and Nansen are developing float-based metrics to improve valuation assessments, but circulating supply remains the standard metric reported by aggregators. When evaluating tokens, look at the top holders list on Etherscan. If the top 10 addresses hold more than 50% of circulating supply, treat the effective float as much smaller than reported circulating supply.
Step-by-Step: How to Verify a Token's Supply on a Block Explorer
Verifying supply data on-chain takes 10-15 minutes and provides accurate, trustworthy numbers. Here's how to do it using Etherscan for Ethereum or Blockscout for Base.
Step 1: Find the Token Contract
Navigate to Etherscan (etherscan.io) or Blockscout for Base. Search for the token using its name or contract address. Verify you've found the correct contract by cross-referencing the address with the project's official documentation.
Step 2: Read Core Data
Click the "Token Tracker" tab. Note the token's decimals—usually 18, meaning divide all raw values by 10^18 to get human-readable numbers. Click the "Contract" tab, then "Read Contract." Find the totalSupply() function and click "Query." The result shows total supply in raw form. Divide by 10^decimals to convert it to standard units.
For example, if totalSupply() returns 50000000000000000000000000 and decimals is 18, divide by 10^18 to get 50,000,000 tokens.
Step 3: Identify Vesting and Treasury Addresses
Click the "Holders" tab to see top token holders. Identify addresses that are:
- Labeled as vesting contracts or time locks
- Known multisig wallets (often have multiple addresses in Gnosis Safe format)
- Exchange deposit addresses (Binance, Coinbase, etc. are usually labeled)
- Project treasury or DAO wallets (check project docs for official addresses)
Step 4: Calculate Circulating Supply
Subtract locked and reserved balances from total supply:
Circulating Supply = Total Supply − Vesting Contracts − Treasury Wallets − Burned TokensBurned tokens typically appear as balance in address 0x0000000000000000000000000000000000000000. Check the Holders tab for this address and subtract that balance if significant.
Step 5: Sanity Check
Compare your calculation to the circulating supply reported by CoinMarketCap or CoinGecko. If the difference exceeds 5%, investigate why. Recent unlocks, data lag, or differing methodologies often explain discrepancies. Trust your on-chain calculation over dashboard numbers when they conflict.
This process works for any ERC-20 token on Ethereum or Base. For tokens on other chains, use the equivalent block explorer (BSCScan for Binance Smart Chain, Polygonscan for Polygon, etc.) and follow the same steps.
Common Traps and Red Flags: Low Float, High FDV, and Hidden Inflation
Several supply-related patterns signal risk or manipulation. Recognizing these red flags helps you avoid overvalued tokens and projects with poor economics.
Low Float, High FDV Launches
When a token launches with less than 10% of max supply circulating and a high FDV relative to market cap, it signals potential manipulation. Few tokens are trading, artificially inflating price. As vesting unlocks occur, supply will multiply while demand may not keep pace, creating massive dilution. This pattern was common during 2021-2022 "low float" launches where projects raised large sums but released minimal tokens initially.
Example: A token with $50 million market cap (price $50, 1 million circulating) but $1 billion FDV (20 million max supply) will face 20x supply inflation over time. Unless demand grows 20x, price will collapse proportionally.
Misreported Circulating Supply
Some projects inflate circulating supply numbers reported to aggregators to appear larger than they are. This manipulation improves ranking on market cap leaderboards without genuine growth. Cross-check aggregator data with on-chain verification. If you find significant discrepancies, treat it as a red flag for project honesty.
Admin Mint Permissions
Review the token's smart contract code (or a verified audit if available) to check if admins can mint unlimited new tokens. Some contracts include mint() functions callable only by the owner or a privileged role. If admins can mint at will, they can inflate supply without warning, diluting all holders. Transparent projects publish clear documentation about minting permissions and commit to eliminating or time-locking them.
Aggressive Unlock Schedules
Tokens that unlock more than 25% of circulating supply in a single quarter face severe price pressure. Check the unlock calendar (often available on project websites or token data sites like Token Unlocks). If unlocks are front-loaded in the first year after launch, early investors and team members can exit quickly, leaving later buyers holding diluted bags.
Rebasing Tokens
Rebasing mechanisms automatically adjust token balances in wallets based on price or supply targets. While this can serve legitimate purposes, it makes circulating supply calculations unreliable because supply changes outside typical minting or burning. Beginners should approach rebasing tokens cautiously and ensure they understand the mechanics before investing.
Reading Token Pages Correctly: Decimals, totalSupply(), and Excluded Addresses
Smart contract interfaces provide precise supply data if you know what to look for. Three elements matter most: decimals, totalSupply(), and excluded addresses.
Decimals
Tokens use decimals to handle fractional amounts. Most ERC-20 tokens use 18 decimals, meaning the smallest unit is 0.000000000000000001 tokens. When you call totalSupply(), the returned value is in the smallest unit. To convert to standard units, divide by 10^decimals.
If a token uses 6 decimals instead of 18 (like USDC), divide raw values by 10^6. Always check decimals before calculating supply to avoid errors.
totalSupply() Function
This function returns the current total supply of tokens that exist on-chain. It's the most reliable source of truth for total supply because it queries the smart contract state directly. However, totalSupply() doesn't distinguish between circulating and locked tokens—that requires manual analysis of holder addresses.
Some contracts implement circulatingSupply() functions that attempt to exclude locked tokens, but these are less common and depend on the contract correctly identifying locked addresses. When available, they're useful, but always verify the logic.
Excluded Addresses
Identifying which addresses hold non-circulating tokens requires judgment. Common categories include:
- Time-locked vesting contracts: Code includes timestamps that prevent transfers until a date passes
- Multisig wallets: Require multiple signatures to move funds, often used for team or DAO holdings
- Dead addresses:
0x0000...0000or explicitly marked burn addresses - Known protocol addresses: DEX liquidity pools, staking contracts, or token bridges that hold tokens operationally but don't increase circulating supply
Review the top 20-30 holders and categorize each address. Sum the balances of addresses you identify as non-circulating and subtract from total supply.
Mini Case Studies: Comparing Two Tokens With the Same Market Cap but Different FDV
To illustrate how supply structure affects valuation, consider two hypothetical governance tokens: Token A and Token B. Both have $100 million market caps but radically different supply dynamics.
Token A: Low Circulating, High FDV
- Price: $50 per token
- Circulating supply: 2 million tokens
- Market cap: $100 million (2M × $50)
- Max supply: 50 million tokens
- FDV: $2.5 billion (50M × $50)
- FDV/Market cap ratio: 25x
- Supply schedule: 2 million circulating now, 48 million locked in four-year vesting
Token A launched recently with only 4% of max supply circulating. The remaining 96% will unlock gradually over four years. If price stays at $50, circulating supply will multiply 25x. If demand doesn't grow proportionally, price must fall to maintain equilibrium. The high FDV gap signals massive future dilution risk.
Token B: High Circulating, Low FDV
- Price: $2 per token
- Circulating supply: 50 million tokens
- Market cap: $100 million (50M × $2)
- Max supply: 60 million tokens
- FDV: $120 million (60M × $2)
- FDV/Market cap ratio: 1.2x
- Supply schedule: 50 million circulating now, 10 million locked in treasury/vesting
Token B launched years ago. Most supply is already circulating. Only 16.7% additional dilution remains. The low FDV gap signals that supply inflation pressure is largely resolved. Future price movements will depend more on demand dynamics than supply changes.
Comparative Assessment
Both tokens have identical $100 million market caps, but Token A faces 25x future dilution while Token B faces only 1.2x. For a long-term holder, Token B presents far less dilution risk. Token A might offer higher short-term upside if demand grows explosively before unlocks occur, but it carries proportionally higher downside risk.
This comparison shows why market cap alone is insufficient for valuation. You must assess FDV, supply schedules, and dilution timelines to understand relative risk and opportunity.
A Practical Checklist: How to Evaluate Any Token's Supply and Valuation
Use this checklist when evaluating any token:
Basic Metrics
- What is the current circulating supply?
- What is the total supply?
- What is the max supply (or is it unlimited)?
- What is the current price?
- What is the market cap?
- What is the FDV?
Dilution Assessment
- What is the FDV/market cap ratio?
- How much additional supply will unlock, and over what timeline?
- Are there major upcoming vesting cliffs?
- Has the project burned tokens or implemented deflationary mechanics?
On-Chain Verification
- Have you verified circulating supply on a block explorer?
- Do aggregator numbers match your on-chain calculation?
- Who are the top 20 holders, and how concentrated is ownership?
- What percentage of circulating supply is held by the top 10 addresses?
Contract Analysis
- Does the contract allow admin minting?
- Are there time-locked or permanently restricted mint permissions?
- Is the contract audited, and are audit reports public?
- Does the token use rebasing or other non-standard supply mechanics?
Red Flags
- Circulating supply less than 10% of max supply (low float risk)
- FDV/market cap ratio above 10x (extreme dilution risk)
- More than 25% of circulating supply unlocking in the next quarter
- Admin can mint unlimited tokens without restrictions
- Significant discrepancy between aggregator data and on-chain data
This checklist provides a systematic framework for assessing token supply and valuation. Apply it consistently to avoid common traps and make informed decisions.
Supply metrics form the foundation of every token valuation. Circulating supply determines market cap. Max supply reveals dilution ceilings. FDV bridges present price to theoretical full dilution. Vesting schedules govern when locked tokens reach markets. Float measures actual tradable supply. Each metric serves a distinct purpose, and understanding their relationships transforms how you evaluate tokens.
Aggregators provide convenient summaries, but on-chain data offers the most accurate truth. Spend 15 minutes verifying supply numbers yourself using block explorers. Check holder concentration. Review vesting schedules. Calculate FDV gaps. These steps separate informed analysis from blind faith in dashboard numbers.
Circulating supply isn't just a number—it's a signal of scarcity, dilution risk, and long-term token economics. Master these concepts, and you'll evaluate tokens with the clarity and confidence that most market participants lack.