What is Market Cap in Crypto?
If you're new to the world of cryptocurrency, you may have asked yourself 'what is market cap in crypto?'.
So, lets discover what is market cap in crypto, and what does it mean for a cryptocurrency? In this guide, we'll explain what a market cap is and how it affects cryptocurrency valuations.
What is Market Cap in Crypto?
What is market capitalisation? In cryptocurrency, market capitalisation (often abbreviated as "market cap") is simply the total value of all coins in circulation. It's calculated by multiplying the total supply of coins by the current price per coin. For example, if there are 100 million ABC coins in circulation and each is trading for $1, then the market cap of ABC would be $100 million. Why is market capitalisation important? The market cap provides a good way to compare different cryptocurrencies. For example, say there are two coins with identical circulating supply and price.
However, one coin has a much higher total supply than the other. Which coin do you think would have the larger market cap?
The answer is obvious: the coin with the higher total supply would have a larger market cap. Therefore, when comparing two cryptocurrencies, it's important to consider both circulating supply and total supply.
Market capitalisation is also a good way to assess a particular cryptocurrency's risk/reward ratio. Generally speaking, the higher the market cap, the more stable and less risky the investment. This isn't always true, but it's a good general rule.
How Do You calculate Market Cap in Crypto?
Cryptocurrencies are often valued according to their market capitalisation, or the total value of all coins in circulation. To calculate market cap, multiply the total supply of coins by the price per coin. A cryptocurrency's market cap can be influenced by several factors, including the total supply of coins, the price per coin, and public perception. A cryptocurrency with a low market cap may be seen as more risky or volatile than one with a higher market cap. However, a low market cap can also mean more potential for growth. As such, the market cap is just one factor to consider when evaluating a cryptocurrency.
Common Methods for Valuing Cryptos
Market cap is one of the most common methods for valuing cryptos and comparing them to each other. Market cap is a good indicator of a crypto's overall value, but it doesn't tell you everything. For example, it doesn't consider the circulating supply of a coin, which can be misleading. Nevertheless, the market cap is still a helpful metric for valuing and comparing cryptos.
Another common method for valuing cryptos is by looking at the total supply. This metric tells you how many coins there are in existence and what percentage of them are in circulation.
For example, if there are 100 million coins in existence and 50 million of them are in circulation, then the total supply would be 50%. The total supply is a good indicator of a crypto's scarcity and can help determine its value.
Author: Hassan Alzaza
My Name is Hassan Al-Zaza, I am a detail-driven and experienced SEO Content Writer living in Germany with over ten years of experience developing and producing top-notch content. I have a Bachelor's degree in English Language and Literature and a Master's in Business Communication. I have been working for 12 years in marketing, Content Writing, and ad Copywriting across SMEs, corporate, and public sector organizations in the EU and the Middle East region. I helped build brands for a wide range of successful companies from IT and software consultancies to the finance industry, tourism, and retail.