- Market capitalization refers to the total dollar value of a capital market.
- Crypto Market Cap provides a comparative analysis in justifying the price of one digital asset over another.
- The crypto market caps are useful in identifying small, mid, and large-cap coins.
Generally, market capitalization refers to the total dollar value of a capital market in consideration. It is an immense metric for the financial industry, especially in crypto marketplaces. This metric helps identify phases of investing in crypto markets, such as selling, purchasing, and HODLing.
The total crypto market capitalization reached a whopping $3 trillion in November 2021. While currently, it sits at $853 Billion. The question is how these numbers are being derived and how such figures impact the financial markets.
Crypto Market Cap – What Is It?
A crypto market cap is the total value of a given currency. This provides a comparative analysis in justifying the price of one digital asset over another. Thus, it results in better investment-making decisions.
There are roughly three categories in which crypto market cap is being distributed:
Small-cap digital assets have a crypto market valuation of less than a billion dollars. Such assets carry many risks and are subject to extreme market price changes.
Mid-cap digital assets have a crypto market valuation between $1 billion and $10 billion. In comparison, they have a good upside potential but are also paired with greater risk.
Crypto Market Capitalization Calculation Index
The stock market capitalization is by multiplying outstanding shares with the current market price. The crypto market cap is calculated by multiplying a coin’s price by the number of coins in circulation.
To better understand this concept, let’s take the number of Bitcoins in circulation, i.e. 19,225,668. The current price of the coin stands at $17,015.13
Thus, the total Bitcoin market cap would be roughly around $327 billion. Bitcoin’s market cap and the price of a Bitcoin have a positive correlation.
For the uninitiated, Ethereum’s market capitalization against Bitcoin stands at $158 billion. It is a fact that there are more ETH tokens than Bitcoins. Still, Bitcoin’s market cap is greater than ETH. This is because of the higher price of Bitcoin.
Why Consider Market Caps?
The crypto market caps are useful in identifying small, mid, and large-cap coins. Considering a token’s scope or future roadmap is necessary to make good investment decisions.
Using market capitalization as a metric gives you a look into a token’s financial aspect. Market cap gives investors plenty of insights, from how the world perceives crypto to global circulation.
This metric also predicts future trends and patterns. Interestingly, if a crypto’s market cap in connection with NFTs is losing users, it reflects in its market cap.
For the uninitiated, a sensible investor must always conduct extensive research. After considering all relevant facts, an investment gets balance and risk protection.