The law of supply and demand is an economic theory that determines the relationship between the supply of a particular good or service and the demand for it, to see what effect that has on its price. The theory describes the fluctuations in the price of anything that can be exchanged on a market.
If a coin is in short supply or if the demand for it is high the situation results in an increase in price. Those who wish to buy it are willing to compete by offering ever higher prices. Alternatively, if a cryptocurrency is in abundance and if the demand for it is low, the prices fall.
Generally, the law of supply and demand predicts that if the demand for something rises, the suppliers will make more of it. Manufacturers are willing to expand their production to sell larger quantities, intending to profit from more sales. But that is impossible when it comes to most cryptocurrencies for two simple reasons: they are limited by max supply and they are distributed.
Max supply determines the total amount of each particular crypto that will ever exist. When it comes to Bitcoin, that number is 21 million. Over 18 million BTC have already been mined and the rest are slowly being added to the pool of total bitcoin supply. But couldn’t someone just change the protocol to release more coins? The simple answer is no. On a distributed network, a person who wanted to abuse the system by double spending coins simply could not do it unless they were willing to spend a lot more money than they would gain.
