The most important factor to consider when making decisions about a token in the crypto market is the crypto market capitalization. The cryptocurrency market cap is a straightforward indication to tell out how big a cryptocurrency is and how well it’s doing in the market. When you judge a cryptocurrency by its market cap, you can tell what value it holds. By doing this, you can make smarter decisions as a crypto investor actively seeking digital coins that will do well in the market.
Understanding Crypto market cap
Cryptocurrency market capitalization, short for crypto market cap, is the total value or size of all Bitcoin or any other cryptocurrency in the crypto marketplace. In the world of crypto, you can estimate the market cap by multiplying the total number of digital coins that have been mined by the cost/price of a single digital coin at any specific time.
Think of the crypto market cap as an estimated gauge for how stable or valuable a crypto asset is likely to be. Generally, cryptocurrencies with greater market cap are likely to be more stable than cryptocurrencies with smaller market cap. However, even the cryptocurrency with the biggest market cap is likely to still experience volatility. As for cryptocurrencies with smaller market caps, they are more liable to the shifts of the market and can experience massive gains or dramatic losses in their value.
Why is market cap important?
The market cap of a cryptocurrency is one way to determine the price, which helps to measure the value of the cryptocurrency. Crypto investors use market cap to learn more about a cryptocurrency and compare its value across other digital currencies.
As a key statistic, the market cap can also indicate the growth potential of a digital coin and whether it is safe to invest in, compared to others.
To demonstrate how this variable can help an investor know the value of a token, let’s compare the crypto market cap of two imaginary cryptocurrencies: Crypto X and Y.
- If crypto X has a total of 400,000 tokens in circulation and the price of each token is $1, then its market cap will be estimated at $400,000.
- If crypto Y has a total of 100,000 tokens in circulation and the price of each token is $2, then its market cap will be estimated at $200,000.
Although the price of each coin of Cryptocurrency Y is higher than Cryptocurrency X, the overall value of Cryptocurrency X is still double that of Cryptocurrency Y.
How is the crypto market cap calculated?
You can determine the market cap of any cryptocurrency at any given time by multiplying the current price of the coin by the overall circulating supply. So the formula for this is:
- Market Cap = Price (X times) Circulating Supply
What can you do with a market cap?
Market cap lets you compare the overall value of one crypto with another so you can make better investment decisions. Generally, we can rank crypto according to their current market cap into three major categories:
1. Large-cap cryptocurrencies
Large-cap cryptocurrencies, such as Bitcoin and Ethereum, boast of a market cap of over $10 billion. Investors consider these tokens to be much lower-risk assets because they have shown a consistent track record of growth and usually have higher liquidity than the average token. Having higher liquidity means that they can easily withstand a higher volume of individuals cashing out without the value/price taking a hit.
2. Mid-cap cryptocurrencies
Mid-cap cryptocurrencies have market caps ranging between S1 billion and $10 billion. These kinds of coins generally have higher risk and more untapped possible upside.
3. Small-cap cryptocurrencies
Small-cap cryptocurrencies generally have a market cap of less than S1 billion and are most sensitive to dramatic price shifts caused by market sentiment.
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Where can I track the price of my cryptocurrencies?
You can create price alerts on Bitmama by following the steps below:
- Login to your Bitmama app
- Select “Crypto Price Alert”
- Click on “Add new” and create the upward or downward price points at which you want to get an alert
Also, you can keep track of market cap on popular platforms like Coinmarketca. This website gives a general overview of how popular each digital currency is. Coinmarketcap offers the crypto market’s most popular index for all applicable financial metrics for digital coins.
On the Coinmarketcap website, the algorithm estimates indicated prices by the volume-weighted average of the general prices obtained from different exchanges. Note that it is very important to watch the circulating supply of a token and not the total supply. This is because it is only the circulating supply of a digital coin that is actually available on the market presently.
The crypto market cap is a very useful metric that both crypto traders and investors can use not just to compare the total value/price of cryptocurrencies, but also market trends and a cryptocurrency’s overall stability. Once you can determine all of these factors, you should be able to make more informed decisions while investing in or trading cryptocurrencies. Lastly, it’s important to note that a lot of cryptocurrencies’ market capitalization can shift dramatically due to their volatility. So the market cap of a digital coin is not always constant at every given time.
Bitmama offers a secure marketplace for crypto enthusiasts. Perform activities like crypto trading, and creating virtual dollar cards for online payment. Get started today by downloading the Bitmama app.
