Supply Inflation and Overhangs: What Cryptocurrency Investors Need to Know
Investors in cryptocurrency need to understand three crucial concepts to succeed in 2026 and beyond, according to The Motley Fool. These concepts include supply inflation, supply overhangs, and holders' revenue.
Supply inflation refers to the rate at which a coin's supply increases, diluting the value of existing units. While this is detrimental for most coins, some have countervailing mechanisms to prevent severe dilution. For example, Bitcoin has nearly completed its process of issuing new supply via mining and will only add less than 1% to circulating supply this year.
On the other hand, Dogecoin issues 10,000 new coins per minute indefinitely, with no mechanisms in place to prevent holders from being diluted. Ripple holds 37% of its total possible supply in escrow and operating wallets, which could be dumped on the market if released.
Holders' revenue is a metric that describes the portion of a network's transaction fees routed back to token holders through mechanisms like buybacks or payouts. Blockchains with significant holders' revenue have a strong link between utilization of the chain and growth of the native token. Hyperliquid, for example, automatically allocates 99% of its network's transaction fees to buy back its own native token.