We live in a dynamic and really changeable time. At this time we can literally expect everything at any moment. Changes and trends are daily and are around us every day, and when we talk about changes and trends, it is worth mentioning the cryptocurrencies that are a real change and a surprise that has been at the peak of popularity for some time. Cryptocurrencies are the latest trend that has taken the whole world by storm. Almost everyone is talking about cryptocurrencies, but very few people understand what they are. So let us get to know what cryptocurrencies are and their limited supply in this article which will certainly satisfy your curiosity.
Cryptocurrencies are not tangible assets like gold or silver which people generally invest in, but they are virtual currencies that you can use on the internet, but only in exchange for goods or services. It is an interesting concept that has not been encountered so far and which has proven to be something that is well accepted and that works great.
The main idea behind developing cryptocurrencies was to create money that people can trade with one another without involving third parties like banks which charge commission fees every time you transact with them on www.bitcointrader.site. It was well implemented and accepted, and it is obvious that at first glance it is a clear concept for people who have accepted and really enjoy it as a way to earn.
Now let us talk about the limited supply which is the main focus of this article.
What Is Limited Supply?
Limited Supply means there can only be a fixed number of units in existence before you hit the supply cap. For example, if we have a total supply of one million units and then only 300 units remain to be mined, this means that there is a limited supply of 300 units left. According to some professionals and experts, this is a good thing, but according to others, this is not exactly the best thing about the crypto world.
So what does it mean for cryptocurrency to have a limited supply? Because this part is not the clearest to look at something more to make things clearer. Let us look at an example of coins with unlimited supply and coins with limited supply.
Example of Coins with Unlimited Supply
To make things much clearer for everyone, we decided to show it through an example through which we will try to explain the whole situation in more detail. Suppose we have a cryptocurrency called ABCCoin which does not have any maximum number of units allowed before you hit the supply cap. In fact, there is no limit to how many units can be created and mined either until the moment that everyone on Earth buys some coins or trades with them at least once. This means that it is a process that has started and continues to function indefinitely, ie the number of non-crypto units will grow and grow.
- Supply of ABCCoin = Infinite Supply
Example of Coins with Limited Supply
Now let us look at an example of coins that have limited supply, but currently do not reach the supply cap yet. Let us assume there are 100 units of coin ABC1 available and people can mine it by solving mathematical problems that can be easily verified. The more miners solve these problems the greater the supply of ABC1 becomes until it finally reaches its supply cap. So there is a limit, but there is a condition under which there is a chance to increase the number or keep the number of coins the same.
- Supply of ABC1 = 100 units currently
When the supply is low relative to demand, this means that there are more sellers than buyers which makes prices lower than usual. However, when the supply starts becoming low relative to demand even more people might be willing to pay higher prices for the coins that they want. This is because they recognize the value and scarcity of those coins and that comes with a demand which results in higher prices as long as the supply doesn’t catch up to those rising demands.
Finally, let us compare both these examples so we can easily understand how limited supply works
The only difference between these two examples is that in one example, the supply of ABCCoin has no limit while in the other it can only grow to a maximum number.
- Supply of ABC1 = 100 units currently
- Supply of ABCCoin = Infinite Supply
As you can see from both illustrations when there are infinite units being created the prices will continue dropping until they hit a point where no one is willing to sell their coins for those prices. This happens because the more people buy the coins, then the higher the demand becomes, and thus prices tend to increase as well. It is a rule of economics, ie a law of demand that finds its application even when it comes to cryptocurrencies. So we will see that this rule is true and we will see that it can even find its application in this world of digital virtual coins.
On the other hand, when only a limited number of units are being created, that means, there can only be a fixed amount in circulation at a time. This means that the prices will eventually shoot up to a point where no one is willing to sell their coins for those prices. This happens because the more people buy, then the higher demand becomes, and thus prices tend to increase as well.
Given that the crypto world and coins of this type are in the focus of everyone constantly, we decided today to discuss it in more detail and bring a little more information on this topic. With what we have brought to you, we hope that we have managed to make things a little clearer and more understandable for all of you so that you can continue practicing mining and investing in cryptocurrencies because do not forget, the future is in them.
