What Does Market Cap Mean in Crypto?2022-09-29
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?
In general, the golden rule is this:
The higher a cryptocurrency’s market cap, the healthier it is deemed to be.
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.
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 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
Cryptocurrencies and their market caps
Market Cap: $188,972,474,806
Verdict: A safe long-term investment as a well-established cryptocurrency.
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.
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.