What is market cap in cryptocurrency?

What is 'market cap in cryptocurrency? Market cap, or capitalisation, is a crucial metric for evaluating cryptocurrency. It is similar to stocks, where a company's total publicly traded common shares are counted.

However, there is one key difference between digital currencies and stocks. It is the ownership. Because, unlike stocks, cryptocurrencies do not indicate the possession of company shares.

So, what is market cap cryptocurrency? Let’s take a deeper look at it and discuss why it is a crucial indicator for a digital token!

Understanding market capitalisation in crypto

'What is market cap cryptocurrency?' is a frequently Googled query. It is one of the most asked questions by crypto newbies. But, it can be fairly easy to understand if you know how it is calculated and what it represents.

It is a value determined by multiplying a token's price by the circulating supply. This value denotes the worth of a cryptocurrency in the marketplace. It is an indicator through which you can track the dominance of cryptocurrencies. CoinMarketCap, which is the most authentic crypto indexing site, also uses capitalisation to rank cryptocurrencies.

For instance, you can determine the Bitcoin market cap by multiplying its current price ($19,131.50) by its circulating supply (19,180,081.00). This will give you the amount of around $366.94 billion, which is the BTC capitalisation.

This value can also help you make investment decisions regarding an asset. A digital token with a higher capitalisation is often perceived as a secure investment.

However, it is noteworthy that capitalisation is a fluctuating value. Primarily, this amount is dependent on two factors; one is the change in supply circulation, and the other one is buying or selling pressure.

Why is market cap important in crypto?

It serves as one of the significant indicators for gauging a coin’s popularity and worth. A digital token’s market capitalisation can give you insights into its size. Also, it reflects on the profit ratio of the token. By comparing the values of two cryptocurrencies, you can evaluate which performs better.

In addition, these values of cryptocurrencies may also give an idea about whether they are over or undervalued. That's why it becomes a key consideration for your investment decisions in crypto.

However, it is not the only indicator you look at; several other factors must be part of your research about a project.

How does market cap affect the crypto price?

It does not necessarily affect the crypto price. But it determines the rank of a digital asset in crypto trading. That’s why it becomes a crucial indicator, sometimes even more important than the price.

For instance, if a token’s price is higher, its total value can still be lower because of the circulating supply. Similarly, a token with a lower price might have a better total value because of a higher circulating supply. This can be indicated through market capitalisation and helps determine a digital asset’s rank.

Final thoughts

Market capitalisation is one of the most significant scales for gauging the potential of a digital asset. It is the total value of an asset, which gives you an idea about its rank among the cryptocurrencies.

You can easily determine this value by multiplying the price of a token by its circulating supply. Through this, you will get the worth of a cryptocurrency in the marketplace.

Therefore, it becomes a key consideration when making an investment decision. Nevertheless, it is not the only yardstick for gauging the performance of a token. It is advisable to analyse several other aspects of a project to make an informed decision.