Crypto market cap explained

Market capitalization, or “market cap” for short, is an essential component of the financial industry, particularly in crypto marketplaces. Before investing in a coin, the majority of traders examine its crypto market cap. This can then indicate the optimal time to sell, purchase, or even HODL.

What is the crypto market cap?

Crypto market cap is the total value of crypto.  The crypto market cap allows you to compare the worth of one crypto to another, enabling you to make better-informed investment decisions. However, market trends, a crypto’s stability, and your own financial status must be taken into account when considering the dangers associated with any investment.

Cryptocurrencies are classified by their market cap into three categories: – Large-cap cryptocurrencies, including Bitcoin and Ethereum, have a market cap of more than $10 billion.  – Mid-cap coins have a crypto market cap between $1 billion and $10 billion.   – Small-cap digital assets have a crypto market valuation of less than $1 billion.

Crypto market cap calculation index

The crypto market cap is computed by multiplying the cryptocurrency’s price by the number of coins in circulation. Crypto market cap = circulating supply x unit price. Let's take the case of Bitcoin BTC is currently worth $16,245 and there are 19 million in circulation, the market capitalization is:  $16,245 x 19,217,250= $311 billion.

BTC and ETH market cap comparison

As frequently as Bitcoin’s price fluctuates, so does its market cap. How does Ethereum compare to Bitcoin in terms of market cap? Ethereum’s market cap is approximately $146 billion at its current price of $1,217 and circulation of 120.25 million coins. Even if there are far more Ethereum tokens in circulation, Bitcoin’s worth increases its market cap.

What does the crypto market cap mean for investors?

A company’s market capitalization determines its investing category on the stock market: small-cap, mid-cap, or large-cap. There are various reasons an investor would classify their investments into these categories. Consequently, understanding the crypto market cap is essential.

Market cap gives investors a great deal of information about every cryptocurrency on the market. It reveals how the world perceives a specific cryptocurrency and its dominance relative to its rivals. Market cap fluctuates coinciding with the price and global circulation of cryptocurrencies and tokens. Market cap can also indicate market patterns and trends.

It’s also vital to understand that market capitalization is always changing because crypto values vary so dramatically. This volatility, along with the possibility of a complete market collapse, is another reason why experts recommend keeping your investments extremely limited and only investing what you’re prepared to lose.

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