Crypto Gets a "Circulating Supply" Makeover—Like Stocks, but Better

Token valuation in the cryptocurrency space has long been plagued by inconsistencies and ambiguities, with the same token often displaying vastly different supply metrics across various data platforms. This has led to distorted market cap calculations and misinformed investment decisions. In response, Artemis, in collaboration with Pantera Capital, has proposed a framework known as “Circulating Supply,” inspired by the concept of “circulating shares” in traditional stock markets. This model seeks to introduce a more transparent and standardized approach to valuing crypto assets by excluding non-circulating tokens—such as those held by protocol foundations, labs, or locked distribution contracts—from the total supply calculation [1]. The aim is to enable investors to compare crypto assets with traditional equities more effectively, aligning the crypto valuation framework closer to institutional financial standards.

The issues with current token supply metrics are multifaceted. Existing metrics such as FDV (Fully Diluted Valuation), which calculates token value as total supply multiplied by price, are often misleading, akin to valuing a stock based on authorized shares rather than outstanding shares. For example, FDV can exaggerate the valuation of a token by assuming all tokens are tradable, leading to overestimations. In contrast, the proposed “Circulating Supply” metric—calculated as total supply minus protocol holdings—more accurately reflects economic reality by excluding tokens that are not freely tradable. This metric is analogous to the concept of “outstanding shares” in equities, and it offers a clearer representation of true ownership, liquidity, and market value [1].

Further refining this concept, Artemis introduces a secondary metric known as “Smart Circulating Supply,” which excludes not just protocol-held tokens but also locked or illiquid ones, making it comparable to the “float shares” in traditional stocks. This dual-tiered approach—Circulating Supply and Smart Circulating Supply—enhances transparency by clearly distinguishing between tokens that exist but are not yet available for trading and those that are actively circulating in the market. This differentiation is crucial for risk assessment, as it allows investors to anticipate potential supply shocks, such as the sudden release of large token holdings or unlocked allocations [1].

The need for these new standards is underscored by the current chaos in token valuation data. Different platforms often report vastly different figures for the same token, leading to valuation discrepancies that can span billions of dollars. For instance, the HYPE token of Hyperliquid has shown significant variation in its circulating supply estimates across platforms like DefiLlama and CoinGecko. These discrepancies arise because some platforms include locked or unissued tokens, while others do not. The lack of a uniform standard complicates peer comparisons and undermines investor confidence. By introducing a standardized framework, Artemis aims to eliminate these ambiguities and provide a reliable benchmark for institutional investors [1].

The proposed framework also addresses the issue of supply risk, which is a key concern for investors. When a project holds a large number of tokens in its own treasury or locked contracts, these tokens can be released at any time, potentially flooding the market and depressing the price. By excluding such tokens from the valuation metric, investors are provided with a more accurate picture of the token’s circulating supply and liquidity. This is particularly important in a market where liquidity can rapidly shift, and where the sudden release of tokens can have a significant impact on price dynamics [1].

Beyond improving valuation accuracy, the framework could serve as a critical infrastructure for institutional capital entry into the crypto space. Institutional investors typically require high levels of transparency and standardization to make informed decisions. The adoption of a unified valuation metric would not only make crypto assets more comparable to traditional financial instruments but also foster trust and credibility in the broader market. As the industry continues to mature and attract more institutional interest, the establishment of standardized valuation metrics like Circulating Supply and Smart Circulating Supply will become increasingly essential for long-term growth and stability [1].