Key Takeaways

  • Dubbed Free Float Supply, it aims to help crypto enthusiasts build and design their portfolios, based on improving valuation techniques.
  • Based on the new metric, Huobi Token has one of the highest deflationary policies, which potentially makes it a good long-term investment.
  • Meanwhile, Coin currently has an annual implied inflation rate of 145%.

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In a move to provide more transparency in a market plagued by obscurity, Coin Metrics developed a new index that dives into the supply dynamics of top cryptocurrencies.

CoinMetric Supply Tool Outlines Long-Term Opportunities

Coin Metrics affirmed in a recent report that strategic stakeholders’ activity within a given cryptocurrency’s network could provide a better understanding of its liquid supply in the market.

Under this premise, the on-chain analytics firm developed a new tool to measure the rate of inflation of multiple digital assets.

Dubbed Free Float Supply, it aims to help crypto enthusiasts build and design their portfolios, based on improving valuation techniques.

“Proof of Work or Proof of Stake blockchains have a rate of inflation from the issuance of tokens to miners/stakers. But what is less understood is the inflation rate of cryptoassets like Stellar, Cardano, XRP, or Chainlink. Whilst these tokens all have fixed or deflationary total on-chain supplies, the transition of restricted assets (such as those held by stakeholders) into the supply available to the market can be perceived as inflation,” reads the report.

Free Gloat Annual Inflation by Coin Metrics
Free Gloat Annual Inflation by Coin Metrics

Some of the most critical outliers out of the cryptocurrencies analyzed by Coin Metrics include Huobi Token, Dogecoin, and Coin.

SIMETRI small cap big gain

The former has the highest deflation rate of 23%, potentially providing a better long-term return than some of the top cryptocurrencies by market cap, including Bitcoin and Ethereum. Huobi Token’s ridiculously low levels of implied inflation are directly related to its periodical token burns.

The Singapore-based cryptocurrency exchange Huobi decided to burn all tokens initially allocated to fund the platform’s operations following a community vote in early March. Nearly 150 million HT were irreversibly destroyed to eliminate them from circulation. This resulted in a dramatic reduction of the free float annual inflation of this cryptocurrency.  

Meanwhile, Dogecoin’s deflation is influenced by the number of addresses that have been “hodling” the altcoin for over five years. Coin Metrics identifies this group of holders as strategic investors, and their tokens are restricted from the liquid supply. 

“In the case of DOGE over the last 12 months, assets that have fallen into this category have been larger than those issued by the mining issuance schedule, thus resulting in a net deflation of Free Float Supply,” said Coin Metrics. 

Dogecoin Hodlers by IntoTheBlock
Dogecoin Hodlers by IntoTheBlock

On the other hand, Coin was deemed as the altcoin with the highest levels of inflation.

Recently, a significant number of these tokens have been put into circulation originating from some of the top founders’ addresses, according to Coin Metrics. The new issuances from these wallets have severely impacted CRO’s inflation levels. 

Cred - earn easier Coin’s free float annual inflation rate is currently hovering around 145%, which may have severe implications for its future price action.

“The largest team address activity during Q2 was the credit of $67M CRO to Coin team addresses, without which the net value of cryptoassets that moved outside of Company Team controlled addresses would have been $76.5M,” affirmed the on-chain analytics firm.

An Immature Market Where Speculation Reigns

Despite the long-term impact that the circulating supply may have on each of these altcoins, their price action seems to disregard supply and demand laws.

Huobi Token and Dogecoin have generated a year-to-date return of nearly 70% against the U.S. dollar, as of today. However, Coin’s investors have significantly profited as this token has provided returns of more than 400% thus far this year.

Huobi Token, Dogecoin, and Coin on TradingView
Huobi Token, Dogecoin, and Coin on TradingView

While speculation continues to reign the cryptocurrency industry, it seems like any project could trend upwards regardless of ts inflationary policies. But as the market grows and becomes more mature, it is imperative to pay close attention to a token’s fundamental values.

Core principles will define the ability of a cryptocurrency to survive in a space that is about to be heavily regulated since anyone can create their own digital asset.

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