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What Does Market Cap Mean in Crypto?

market cap crypto

Any cryptocurrency enthusiast worth their salt will recognize that there are certain indicators that impact the value of a cryptocurrency. One of those indicators is market capitalization, or market cap for short.
Before we get into the technicalities of how market caps affect cryptocurrency, let’s explain what a market cap is.


A cap indicates the total combined value of the shares of a company. Its capitalization within the market is calculated using a specific formula, but we’re not here to talk about traditional companies and their shares. Let’s talk about market cap in crypto.

Why does market cap matter in crypto?

Market cap is a resourceful barometer that helps us get a better read on the health of a specific cryptocurrency. More importantly, it helps us gauge the potential of a coin’s future. Will it be a volatile short-lived coin, or does it have the potential to outlast and survive bear markets?
In general, the golden rule is this:


The higher a cryptocurrency’s market cap, the healthier it is deemed to be.

Different types of cryptocurrency market caps?

There are three typical market cap levels that we use to refer to cryptocurrencies.
Large Cap: Cryptocurrencies with a large cap tend to be the most reliable investments. Their total valuation is usually north of ten billion dollars. Think of large cap cryptos the same way you would think of blue chip companies such as Apple or Amazon. A safe, no-risk investment that you know isn’t going anywhere anytime soon.


Mid Cap: Mid cap cryptocurrencies are the best of both worlds. They might not be as bulletproof as large cap coins considering that they have a higher risk of volatility, but they do have more potential to grow.


Small Cap: The future of small cap cryptocurrencies is a coin toss (no pun intended). They’re notorious for going either way. You could either make serious money or lose it in a matter of minutes. Short-term is the keyword to remember when dealing with low market cap crypto.

How do you calculate the cryptocurrency market cap?


There’s a simple formula for figuring out the market cap of a cryptocurrency.
Current Price x Supply in Circulation = Market Cap
Let’s take the example of the most popular cryptocurrency out there, Bitcoin.
Note: The figures below are correct as of the time of writing.

Bitcoin’s Current Price = $19,994.40
Bitcoin’s Circulating Supply = 19,138,275 BTC
Bitcoin’s Market Cap = 19,994.40 x 19,138,275
Bitcoin’s Market Cap = $382,658,325,660

You’d be forgiven for mistaking Bitcoin’s market cap for a phone number, it’s absolutely huge. That’s $382 billion, making it the most powerful large cap cryptocurrency in the world!

Cryptocurrencies and their market caps

Let’s take a look at some cryptocurrencies based solely off of their varied levels of market caps.

Ethereum
Market Cap: $188,972,474,806
Verdict: A safe long-term investment as a well-established cryptocurrency.


Kusama
Market Cap: $395,255,492
Verdict: A mid cap cryptocurrency with a healthy $395 million cap. Could be prone to fluctuations, and needs to be monitored accordingly.

Statik
Market Cap: $56,371
Verdict: Doesn’t look the most established, does it? At barely $60,000, Statik could go either way. Expect the short-term to dictate the future of this cryptocurrency. Avoid unless you’re looking to make quick short-term gains.

Are market caps really that essential in deciding which cryptocurrency to invest in?

To rely on just one indicator would be foolish, regardless of what that indicator is. However, the truth is that some of them do outweigh the rest in terms of importance. Market caps are one of the most looked at statistics when researching cryptocurrencies. They’ve proven to be a reliable metric, and most importantly, they’re a figure that you can easily find yourself. There’s no secrecy clouding market caps. There are websites dedicated to displaying this indicator of just about every cryptocurrency in circulation. We advise you research them thoroughly before making your decision on which coin to invest in.


As always, happy and safe trading!

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