When you think about investing in a cryptocurrency, such as Bitcoin or Ethereum, you might come across a term cryptocurrency market cap. You may also looking forward answers to
What is cryptocurrency market cap?
How is cryptocurrency market cap necessary?
So, if you are looking for answers, then you are at the right place. We will give you a clear idea of the cryptocurrency market cap and its importance.
Cryptocurrency market cap: What is it?
Cryptocurrency market capitalization (cap) is a factor that plays an essential role in the determination of the value of a cryptocurrency in the market. It tells about how popular a cryptocurrency is among investors.
It gives the total value of all the cryptocurrencies that have been circulating. This indicates the stability of the cryptocurrency; the cryptocurrencies having large market cap are more stable compared to the ones having a small market cap. Wherever changes the crypto market goes through, they will have a far more significant effect on the value of small-cap cryptocurrency.
How is cryptocurrency market cap calculated?
The market cap of a cryptocurrency depends on the price of a single coin and the number of cash circulating in the crypto market.
It can be calculated when the price of a single coin is multiplied by the number of circulating coins.
What is the importance of the cryptocurrency market cap?
Knowing what is cryptocurrency market cap can help you understand the importance that lies behind it.
Being aware of the market cap of any cryptocurrency will allow you to know the following:
- The worth of that cryptocurrency in the crypto
- If it has any potential to grow further
By getting an idea about the worth and growth potential of a cryptocurrency through the market cap, you will buy the one which will give you far more profits than losses. Thus, the market cap is an essential factor to consider when you are purchasing any cryptocurrency.
Let’s give you an example so you can have a better idea.
There are two coins, X and Y. There is the circulation of 1000 X coins. The price of one X coin is 3 dollars. Meanwhile, the circulation number of coin Y is 10,000, and it stands at worth 1 dollar.
Now, what is cryptocurrency market cap of each coin?
We have calculated it for you.
Coin X: 3000 dollars.
Coin Y: 10,000 dollars
The market value of coin Y is far greater than the value of coin Y; thus, the safe decision will be to invest in coin Y.
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Large-cap, Mid-cap, and Small-cap cryptocurrency
There are three categories for cryptocurrencies to fall into according to their market cap. These are:
The market cap of these cryptocurrencies is calculated to be more than $10 billion. Investing in them is not as risky as compared to other types. It is because they have shown tremendous growth and are less volatile. Bitcoin and Ethereum are considered large-cap cryptocurrencies.
The market cap value of mid-cap cryptocurrencies stands at a price between $10 billion and $1 billion. Though their volatility is higher than large-cap cryptocurrencies, their potential to grow is far more than them.
Cryptocurrencies having a market cap falling under $1 billion are small-cap. They show a highly volatile nature, which makes investing in them very risky.
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Summing it up, the market cap is considered a valuable metric that helps to decide which type of cryptocurrency you should invest in.
Besides having an idea about the market cap, stepping into the cryptocurrency market also requires you to learn about current market trends. With the correct knowledge in your mind, you can make decisions that are considered safe and less risky.
We hope that from telling what is market cap cryptocurrency to what importance it holds, this article has answered every question you had related to the market cap.