Cryptocurrency Tokenomics: How To Profit On Digital Currency – Bankrate.com

Compare accounts
Get guidance
Compare accounts
Get guidance
Money market accounts
Money market accounts are similar to savings accounts, but offer some checking features as well.
Get guidance
Banking
Unlock financial rewards by signing up for a savings or checking account with a bonus offer.
Get guidance
Compare rates
Get guidance
Compare rates
Get guidance
Buying & selling
Find an expert who knows the market. Compare trusted real estate agents all in one place.
Get guidance
Compare investments
Get guidance
Compare plans
Get guidance
Finding an advisor
Get guidance
Compare cards
Find my matches
See your card matches
Answer a few quick questions and we’ll show you your top credit card options.
Compare cards
See what the experts say
Read in-depth credit card reviews to find out which cards have the best perks and more.
Get guidance
Get advice
Build credit
Compare lenders
Get guidance
Compare lenders
Get guidance
Compare lenders
Get guidance
Compare lenders
Get guidance
HELOC
A HELOC is a variable-rate line of credit that lets you borrow funds for a set period and repay them later.
Home equity basics
Home equity loans
Home equity loans let you borrow a lump sum at a fixed rate, based on how much of the home you own outright.
Get guidance
Compare rates
Get guidance
Compare rates
Get guidance
Compare companies
Get guidance
We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free – so that you can make financial decisions with confidence.
Our articles, interactive tools, and hypothetical examples contain information to help you conduct research but are not intended to serve as investment advice, and we cannot guarantee that this information is applicable or accurate to your personal circumstances. Any estimates based on past performance do not a guarantee future performance, and prior to making any investment you should discuss your specific investment needs or seek advice from a qualified professional.
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you.
All reviews are prepared by our staff. Opinions expressed are solely those of the reviewer and have not been reviewed or approved by any advertiser. The information, including any rates, terms and fees associated with financial products, presented in the review is accurate as of the date of publication.
Bankrate is always editorially independent. While we adhere to strict editorial integrity , this post may contain references to products from our partners. Here’s an explanation for how we make money . Our Bankrate promise is to ensure everything we publish is objective, accurate and trustworthy.
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. All of our content is authored by highly qualified professionals and edited by subject matter experts, who ensure everything we publish is objective, accurate and trustworthy.
Our investing reporters and editors focus on the points consumers care about most — how to get started, the best brokers, types of investment accounts, how to choose investments and more — so you can feel confident when investing your money.
The investment information provided in this table is for informational and general educational purposes only and should not be construed as investment or financial advice. Bankrate does not offer advisory or brokerage services, nor does it provide individualized recommendations or personalized investment advice. Investment decisions should be based on an evaluation of your own personal financial situation, needs, risk tolerance and investment objectives. Investing involves risk including the potential loss of principal.
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions.
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information.
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey.
Bankrate follows a strict editorial policy, so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers.
We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money.
Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range, can also impact how and where products appear on this site. While we strive to provide a wide range of offers, Bankrate does not include information about every financial or credit product or service.
Bankrate is always editorially independent. While we adhere to strict editorial integrity , this post may contain references to products from our partners. Here’s an explanation for how we make money . Our Bankrate promise is to ensure everything we publish is objective, accurate and trustworthy.
Tokenomics is a word that gets thrown around a lot in the cryptocurrency world. But what exactly is it? It’s one of the most powerful forces shaping the price appreciation of a cryptocurrency, and it’s vital to know a crypto’s tokenomics before you even consider putting money in a crypto coin. 
Here’s what you need to know about tokenomics and why it’s a key driver of a coin’s price. 
Tokenomics is a portmanteau of the words token and economics, and it’s used to describe how a cryptocurrency is managed. Tokenomics includes all facets of the economic side of how a crypto coin is managed, rather than the technical or operational side of the equation. 
So a crypto’s tokenomics includes such things as:
Each of these items concerns the supply of the cryptocurrency, particularly how fast new coins enter circulation and whether coins will be taken out of circulation, perhaps by using them to pay for services in the coin’s economy. Tokenomics is one of the key things highlighted by issuers of memecoins when they’re seeking to raise money for a hot new memecoin. 
The original cryptocurrency — Bitcoin — has some of the most well-known tokenomics, including its total issuance being limited to 21 million coins. Bitcoin’s currency management is much different from that of Ethereum and Dogecoin, two other popular cryptocurrencies.
A coin’s tokenomics is key to its potential future value, because a coin’s supply is closely watched by potential traders. Traders want to know if the coin’s issuers are prepared to print Monopoly money or whether they’re going to be more careful about how they issue coins. Coins with a lower rate of issuance may be more attractive than those with a higher issuance rate. 
But that’s only one side of the coin. Cryptocurrencies can also take supply out of circulation by “burning” coins, perhaps when owners use the currency for something. By reducing supply, a coin’s issuer may help support the price and give confidence to traders. By managing supply, a coin issuer can turn a cryptocurrency from inflationary to deflationary or vice versa. Whether a cryptocurrency is deflationary or inflationary can be incredibly important to its price. 
In an inflationary system, more coins are issued each year than are taken out of circulation. In other words, net issuance is positive. In an inflationary system, the purchasing power of a currency falls over time as more is issued, all else equal. In terms of dollars, that means an inflationary cryptocurrency would tend to fall in price, again all else equal. 
It’s just the reverse for a deflationary system. More coins are taken out of circulation than are put into circulation, pushing net issuance into negative territory. In a deflationary system, the purchasing power of a currency rises over time as coins leave the system, all else equal. In terms of dollars, the value of a coin rises in a deflationary system, all else equal. 
So cryptocurrencies often want to show that they have deflationary tokenomics to help support the coin price. For example, in 2022 Ethereum undertook the Merge, an action that saw the coin move from a proof-of-work system to a proof-of-stake system. As part of that change, Ethereum sharply reduced its net issuance in a bid to become deflationary. It instituted a mechanism to burn coins as part of transactions, and now its supply is net deflationary, according to many.
In effect, Ethereum’s issuers “rigged” the coin’s tokenomics to support its price, helping the price to rise over time but by no means guaranteeing it.
Everyone may talk about a coin’s deflationary issuance driving up price, but supply is only half the equation, and demand is the critical factor in driving a coin’s price higher. There are many things in short supply that are worthless — the number of glasses in your kitchen cabinet is limited but nobody will pay anything for them, for instance. Limited supply is meaningless in the absence of demand for an object or a cryptocurrency.  
Without demand, any cryptocurrency is worthless, since it has no value apart from what people are willing to pay for it. That’s why some 20,000 or more cryptocurrencies exist but only a small handful are actually worth anything at all and nearly all are effectively worthless. 
But managing the supply of a popular cryptocurrency — one that already has demand for its coins — can move its price higher (or lower) because it encourages traders to buy. They can purchase with the knowledge that a cryptocurrency won’t be overinflated by the coin’s issuers. That attracts demand, which attracts still more demand, resulting in a virtuous circle.
It’s these psychological dynamics that are so important in manipulating crypto prices. By increasing demand against a relatively fixed or even shrinking supply of coins, prices can rise indefinitely. So part of the process is to increase enthusiasm around deflationary coins.    
As the first cryptocurrency, Bitcoin’s tokenomics are well studied and are highly deflationary. It famously has just 21 million coins available for mining, and even that limited issuance slows over time, until the total supply is issued around the year 2140. As issuance slows, Bitcoin mining requires more and more energy and expense. 
But Bitcoin has other favorable tailwinds for its supply. While 21 million coins is the maximum number of outstanding coins, some estimates suggest that some 3.7 million coins have simply been lost, likely forever. They may have been purchased early in the lifetime of Bitcoin, when coins were cheap and it was a curious novelty. But if Bitcoin owners threw away hard drives that held these coins, they’re likely permanently unavailable and effectively dead. So the real maximum supply is even lower than the potential maximum. 
So Bitcoin benefits from ever slower issuance and a capped number of coins on the supply side. But it also benefits from a herding effect as the most popular cryptocurrency, as well as the perception that it’s a scarce resource. On the demand side, Bitcoin analysts keep ratcheting up price targets, driving “Bitcoin fever” ever higher and stoking demand for the coins.
So supply is fixed and demand may continue rising, potentially leading to lollapalooza effects on the price, as it has already for an asset that was created out of thin air. However, if demand dries up for any reason — say, if quantum computing can break the coin’s cryptography and effectively counterfeit coins — Bitcoin’s price could fall to nothing. Again, it’s vital to remember that the only thing supporting Bitcoin’s price is the expectation that someone else will buy it for a higher price. 
Bitcoin is backed by nothing by sentiment, unlike stocks, which are backed by the assets and cash flow of an underlying business. So investor beware. 
Don’t even think of putting money into a cryptocurrency until you understand its tokenomics, including how many coins it’s issuing and whether coins can be burned. Understanding this key factor can help you determine whether a cryptocurrency may be successful in the future. 
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
Best online brokers of 2025: Choose the right brokerage firm for you
Best short-term bond funds in February 2025
Best small-cap ETFs in February 2025
Best value ETFs: Top funds that hold bargain-priced stocks
Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range, can also impact how and where products appear on this site. While we strive to provide a wide range of offers, Bankrate does not include information about every financial or credit product or service.
Bankrate, LLC NMLS ID# 1427381 | NMLS Consumer Access
BR Tech Services, Inc. NMLS ID #1743443 | NMLS Consumer Access
© 2025 Bankrate, LLC. A Red Ventures company. All Rights Reserved.

source