Market Capitalization in Crypto- What you should know

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3 years ago

The word Market Capitalization popularly known as 'market cap' is not a new term in the crypto space. As a matter of fact, it is a popular term in the world of finances generally.

In the cryptocurrency world, Market capitalization is a term that is usually used to define a metric that measures the relative size of a cryptocurrency.

It basically measures the general dominance and popularity of a particular cryptocurrency in the crypto market.

The main difference between market cap in the world of traditional finances (as with stocks, etc) and the crypto world revolves around how they are both calculated. With company stocks, calculating the market cap is done by multiplying the total number of company shares by the current price.

i.e Market Cap = total number of shares x current price

To calculate the market capitalization of a particular cryptocurrency is also quite simple; All you have to do is just to multiply the price per unit of a particular coin by the total circulating supply of the coin.

i.e Market Cap = Current Price x Circulating Supply

Take for example, if we have a cryptocurrency with a value of $5 per coin and having a circulating supply of 12,000,000 coins, the coin market capitalization will simply be;

5 x 12,000,000= $60,000,000

It is important to note that the circulating supply of a cryptocurrency is entirely different from the total supply. Total supply is the maximum number of coins that are currently minted while circulating supply is the total amount of coins currently available to the public for transactions.

All thanks to coinmarketcap, measuring market capitalization can be done with seamless ease! All you just have to do is visit the website and get all the essential market details of any registered coin of your choice. Details like the current price, the price changes in realtime, the market capitalization, the circulating supply, and trading volume can all be found there.

RELEVANCE OF MARKET CAPITALIZATION

Generally, the market capitalization of a particular coin plays a huge role in helping to identify the value of a cryptocurrency in order to accurately compare it against other cryptocurrencies- It helps to know how 'big' a cryptocurrency is in the market compared to its counterparts.

Determining and knowing the market capitalization of a cryptocurrency can also impact coin research and investment decisions, and when adequately used, much 'smarter' investment decisions could be made.

While the size, performance, and dominance of a particular cryptocurrency can be determined by having a look at the market capitalization, it is also very important to note that the market cap does not actually indicate the total money inflow in the market or total fiat currency investment on a particular cryptocurrency.

For a cryptocurrency to have a significant increase in market cap, the price of a single unit would either have to increase in value or the total circulating supply increases, without the actual price per coin reducing.

Take for example, two coins;

BCH- Price: $400, Circulating Supply: 18,600,863 BCH, Market Cap: $7,385,690,884 and XRP- Price: $0.229, Circulating Supply: 45,404,028,640 XRP, Market Cap: $10,196,123,863

Here, XRP can be seen to have a higher market cap compared to BCH despite having a much lower price. This is basically because XRP has a much larger circulating supply. And for BCH to have a greater market cap value, the price per coin would either have to increase greatly or the total circulating supply of BCH would have to increase without the actual price per coin reducing.

THE TOP 10 COINS BY MARKET CAP PRESENTLY

1.BITCOIN (BTC)- $607,068,637,840

2.ETHEREUM (ETH)- $104,302,870,693

3.TETHER (USDT)- $21,330,919,897

4.RIPPLE (XRP)- $10,196,123,863

5.LITECOIN (LTC)- $9,971,985,326

6.POLKADOT (DOT)- $8,511,418,267

7.BITCOIN CASH (BCH)- $7,385,690,884

8.CARDANO (ADA)- $5,971,687,612

9.BINANCE COIN (BNB)- $5,841,214,871

10.CHAINLINK (LINK)- $5,136,066,247

Always remember, the best way to monitor the market capitalization of cryptocurrencies in real-time is by using coinmarketcap.com.


Thank you for taking the time to read this. Kindly let me know what you think in the comments! :)

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