Introduction
The crypto market is a volatile and unpredictable place. No matter which coin you’re looking at, it’s hard to predict what’s going to happen just a few hours down the road. With so many different coins in circulation, some of them are bound to go up (or down) at any given moment—but how do you know which ones are worth investing in?
This is where crypto market cap comes into play: it helps you determine which coins have gained value over time and are therefore more likely to continue doing so. The bigger the market cap, the more valuable your investment will become! So, what is a crypto market cap? And how can you use it to your advantage? Keep reading to find out!
What Is Crypto Market Cap?
Market capitalization is the total value of a company’s outstanding shares. In other words, it’s the price per share multiplied by the number of shares that have been issued.
For instance, if you owned 100 shares in XYZ Corp., and each share cost $10 apiece, your market cap would be $1,000 (100 x $10). If you then bought another 50 shares at $11 apiece, your market cap would now be $1,100 ($1,100 = [150 x 11] + [50 x 10]).
How Is Crypto Market Cap Calculated?
It’s important to note that the crypto market cap is a calculated number that can be found with a simple equation. The market cap of any cryptocurrency is calculated by multiplying its current price by its total supply.
This means that if you want to get an idea of how valuable a certain cryptocurrency is, you just have to multiply its current price by how many coins are currently in circulation (or available for sale). This will give you your best approximation of what the total value of all those coins would be if they were sold at once.
In other words, the higher the market cap, the more valuable it’s considered to be!
Terms to Remember for Calculating the Market Cap of a Cryptocurrency
- Circulating supply: is the number of coins or tokens currently in circulation (which may be less than the total supply).
- Market price: is how much the market values a cryptocurrency at, i.e., it’s price in dollars or another unit of account.
- Market capitalization: This refers to the current value of all outstanding shares on a stock exchange, and it can also refer to other types of financial instruments (such as bonds) where there are multiple buyers and sellers in an open market.
High market cap indication factors
Simply put, a high market cap indicates that a coin has a large market share.
- The total crypto market cap is $21 million, which means that all cryptocurrencies combined have a value of $21 million.
- Market capitalization is calculated by multiplying the price of each coin with its circulating supply. For example, if the price of ETH is $300 and there’s 100 ETH in circulation, then Ethereum’s market capitalization would be calculated as 300 * 100 = $30,000 (the sum).
- In stock markets, it refers to how much money can be raised from an IPO (Initial Public Offering) or IPO-like token sale. In this case, we’re talking about how much money could potentially be raised by issuing new tokens on top of another cryptocurrency blockchain such as Ethereum or NEO – but not necessarily announcing an ICO!
- Total supply refers to all existing tokens and coins being held by individuals around the world right now – but doesn’t include any hidden accounts…yet! If everyone were to sell their coins at once today then this number would obviously increase significantly over time due to inflationary effects caused by more people buying into Bitcoin than selling off their holdings later downline after they’ve made some profit off it first time round.
Trading volumes
Trading volumes are the total value of all transactions that have taken place over a period of time. So if someone bought 1 BTC from you for $1,000 and then sold it again for $2,000, this would be an example of trading volume.
Thus, the volume can be summed up as:
- The number of coins traded
- The amount of money traded
- The number of transactions made
Market Capitalization and Investment Decisions
Market capitalization is an important metric for investors, because it provides a way to compare different coins. Because market cap can be used to compare the relative value of a cryptocurrency, it is useful when determining whether or not you should invest in that particular coin. Additionally, market cap can be used as a quick way to determine how liquid a coin is. Liquidity refers to how quickly you can sell your assets without affecting the price; if your assets are illiquid and there aren’t many buyers out there, you’ll have trouble selling them at their current rate—and possibly even losing money on them if they’re overpriced!
Liquidity is important for investors, because it means you can get access to your money quickly. If you’re looking at a coin and see that its market cap is $20 million, but the average daily trading volume is only $50,000—that means there’s only about five people buying and selling this coin each day! That’s not enough to make it a liquid market. In fact, this is one of the main reasons why many investors prefer coins with a high market cap—because they’re more likely to be liquid and have plenty of buyers and sellers at any given time.
Crypto market cap is just like any other market cap.
The total crypto market cap is just like any other market cap; it’s simply the sum of all crypto market caps across all cryptocurrencies in circulation. In fact, since there are many more altcoins than bitcoin (the largest cryptocurrency), this makes sense—the total value would be much higher than just one currency!
Conclusion
This is a very exciting time for the cryptocurrency market, and it’s important to understand how the market cap is calculated. It’s also important to know how this number affects your investment decisions. Understanding these concepts will help you make better-informed decisions on which cryptocurrencies to invest in, or whether they are overvalued or undervalued at any given time.
