The question about what Crypto Market Cap is can give detailed information to anyone in the crypto space if it is answered in a good way.
Cryptocurrency market capitalization known as crypto market cap is often regarded as the
a single most important indicator for ranking a cryptocurrency.
A good understanding of the concept of crypto market caps is therefore paramount both for beginners in the crypto world and cryptocurrency investors and enthusiasts.
This article is aimed at helping get a good grasp of what the crypto market cap is and why it is
important.
We will also touch on the classifications of the crypto market cap and other related concepts.
So, let’s begin with the very first question. ‘What is the crypto market cap?’
Read Also: ShibaSwap Bone Enters The Top 100 Cryptocurrencies By Market Cap.
What is CryptoMarketCap?
Cryptocurrency market capitalization is a measure of a cryptocurrency’s size and popularity.
In a simple explanation crypto market cap is an indicator of the market value of a particular cryptocurrency.
Generally, the higher the value of a cryptocurrency market cap, the more popular the cryptocurrency and the higher its worth.
Also the higher the market cap of crypto, the better it is in terms of investment because high market cap cryptocurrencies generally have low risk in investing in that cryptocurrencies.
This low-risk investment profile of large market cap cryptocurrencies is due to the fact that they are relatively stable.
Finding the value of a cryptocurrency market cap is pretty easy, it is the product of the current price of the coin and the total number of that coin in circulation.
So, we can express it simply as; Crypto market cap = current price × circulating supply
But the whole thing about market capitalization is a big deal that leads us to the question of
the importance of crypto market capitalization.
Read Also: Terra Classic (LUNC) Regains Its $1 Billion Market Capitalization, Having a Spike of 13%
WHY IS CRYPTO MARKET CAP IMPORTANT?
Cryptocurrency market cap is very important because it shows the global view of a particular
cryptocurrency and its dominance in relation to its competitors.
People generally judge a cryptocurrency’s value or worth by its price, but this is not a
good basis for ascertaining a coin’s worth, especially for crypto investors and traders, this is because
the price of cryptocurrency does not give us information about the value of that cryptocurrency,
and being that the price of the cryptocurrency is not fixed, using the price as the major index of
measuring the worth of a cryptocurrency may be misleading.
The price of a cryptocurrency does not give us any information about the number of people interested in that particular cryptocurrency globally.
A cryptocurrency with a higher price may have a lower market cap compared to another
cryptocurrency with a lower price if the total circulating supply of the latter is significantly high.
Some still argue the importance of the Cryptocurrency market cap and its relevance in making
investment choices, saying that since the price of crypto is not fixed, the market cap is not really a good index to consider in making an investment.
Also as Julian Hosp — co-founder of cryptocurrency TenX, said the metric has some serious
limitations especially because a given coin market capitalization is heavily dependent on the
number of coins on issuance, which appears to be at the discretion of the coin creators when they launch an Initial Coin Offering (ICO).
Despite these views, knowing these gives you more details about a cryptocurrency, and can also help out to make an informed choice.
CLASSIFICATION OF CRYPTOCURRENCIES BASED ON MARKET CAP
Cryptocurrencies are classified into four (4) classes based on their market cap:
- Mega-cap Cryptocurrencies
These include just Bitcoin (BTC) and Ethereum (ETH). They have a current market cap of over
$350 billion and $170 billion respectively as of the time of writing this article.
- Large-cap Cryptocurrencies
These have a market cap of more than $10 billion. A few of them are XRP, Tether, Binance coin,
Cardona (ADA) etc.
Many large-cap cryptocurrencies are stablecoins due to their ability to remain
relatively stable in value and are seen as low-risk investments due to their risk-reward record.
- Medium-cap Cryptocurrencies
These classes of cryptocurrencies have a market cap ranging between $1 billion to $10 billion.
Some examples of these cryptocurrencies include Solana, polygon, Tron, Dai, Binance USD
, etc.
investors consider them as high-risk investments but due to their untapped potential, they are also considered high-reward coins.
- Small-cap Cryptocurrencies
This class includes cryptocurrencies like Pax dollar, Neo, Rocket pool, Chiliz, USDD, etc., they
have marketcap values below $1 billion. They are considered to carry the highest levels of
risk.
Read Also: The Long-awaTited Terra Classic Circulating Supply Is Out On CoinMarketCap. Check It Out
FULLY DILUTED MARKET CAP
Recall that earlier we established that the value of a cryptocurrencies market cap is
calculated by multiplying the current price by the circulating supply.
However, when a cryptocurrency has its total supply in circulation, the market is said to be fully diluted and
its market cap is then referred to as the fully diluted market cap.
WHAT CAN YOU DO WITH THE CRYPTO MARKET CAP?
The knowledge of crypto market capitalization allows you to know and compare the total value
of one cryptocurrency with another so that you can make more informed investment choices.