Free Float Supply – A Better Measure of Market Capitalization

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Coin Metrics is pleased to announce the release of its Free Float Supply Methodology and the first set of supply data to support the top ranked cryptoassets by market capitalization. 

Free Float Supply more accurately represents market realities and dynamics and thus can better inform market participants and aid in making intelligent and informed decisions. 

The concept of Free Float Supply was first introduced in traditional equity markets in the late 1990s to provide a more accurate representation of the supply of shares that were available to public markets. Prior to free float, indexes were constructed and weighted utilizing the total number of shares issued (i.e. total number of shares stated in the company registry). However, as companies increasingly issued less shares to the market, Asset Managers, Index Funds, etc. started incurring high costs and tracking error that resulted from indexes misrepresenting market supply/demand dynamics. Index Administrators were able to overcome this by  applying a methodology that restricted particular strategic and insider shareholders’ shares from supply calculations.

Coin Metrics, as an Independent Index Administrator, decided that the most prudent approach to designing indexes was to adopt a similar methodology to supply determination and develop a standardized methodology to be applied uniformly across the various blockchain architectures and cryptoasset tokenomic models.

The intent of Free Float is to determine the supply that is highly unlikely to contribute to liquidity in the short term.  Coin Metrics identified and excluded the following types of cryptoassets from a protocol’s Free Float Supply:

  • Foundation cryptoassets that are held and controlled by a centralized or decentralized organization directly associated with the protocol
  • Foundering team cryptoassets that are publicly disclosed or can be determined from genesis block forensic investigations
  • Venture capital and early investor cryptoassets that are subject to a vesting schedule
  • Company employee cryptoasset holdings that are subject to a vesting schedule
  • Cryptoassets that are staked in a smart contract to partake in governance and long-term strategic outcomes of a network without any direct monetary incentive to do so
  • Burned cryptoassets
  • Provably lost cryptoassets
  • Any cryptoassets that have been inactive on-chain for 5 or more years
  • Forked cryptoassets that have never been active on the forked chain

For more information on the applications of Free Float Supply, please refer to SOTN: Introducing Free Float Supply.

For a detailed explanation of Free Float Supply and its application, please refer to the CMBI Adjusted Free Float Methodology.

If you are a financial service provider that would like to discuss the Coin Metrics Free Float Methodology, please reach out to [email protected].


ABOUT COIN METRICS

Coin Metrics is a leading provider of transparent and actionable cryptoasset market and network data. Coin Metrics delivers mature data across multiple formats to various industry stakeholders, including financial enterprises, funds, media and research outlets, and data/application providers. Coin Metrics’ data empowers its clients and the public to better understand, value, use, and ultimately steward public crypto networks. Further Coin Metrics research can be found here.


ABOUT CMBI

Coin Metrics launched CMBI to bring independent and transparent index solutions to the cryptoasset investment community. In the nascent and often complex cryptoasset market, CMBI Indexes strive to be dynamic and adjust to the rapidly changing market conditions to design and maintain investable products. CMBI Indexes provide markets and customers with industry-leading solutions that aid in performance benchmarking and asset allocation.