Market cap of crypto, or capitalization of the cryptocurrency market, is a term used to describe the total value of all crypto in circulation.
Today we will have a brief look at the market cap and types of capitalization.
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How Is Market Cap Calculated?
The valuation of a cryptocurrency is determined by multiplying the circulating supply with the current price:
Market Cap = Price X Circulating Supply
There are many websites for monitoring the crypto market capitalization and obtaining an overview of their acceptance. They provide the most used crypto index, encompassing all financial metrics for digital currencies.
Prices are calculated by taking the volume-weighted average of prices across various exchanges. It is essential to emphasize the monitoring of a crypto’s circulating supply rather than its total supply. This is because only the circulating supply represents the available amount.
How Important Is Crypto Market Cap Metric?
The significance of the cryptocurrency size is a subject of ongoing debate. Critics argue that it mirrors the stock market’s influence. This potentially leads to misguided investment choices driven by fear and greed.
However, capitalization can offer an objective perspective on the performance of altcoins.
Types of Crypto Market Capitalization
There are different types of caps that investors and analysts use to categorize digital assets.
Large-Cap Cryptocurrencies
These coins have substantial capitalization, exceeding $10 billion. Large cryptos are considered more established and stable compared to their smaller counterparts. Bitcoin (BTC) and Ethereum (ETH) are prime examples of large cryptocurrencies. Investors often view these coins as safer long-term investments.
Mid-Cap Cryptocurrencies
Mid-cap cryptos fall between large and small-cap coins. These digital assets have a capitalization ranging from a few hundred million to several billion dollars. Mid-capitalization cryptos represent projects that are gaining traction and have the potential for significant growth. Examples include Cardano (ADA) and Chainlink (LINK). Investing in these cryptos can balance stability and potential returns. But they may still exhibit higher volatility than large-capitalization coins.
Small-Cap Cryptocurrencies
These cryptos have a low capitalization, typically below $500 million. These coins represent projects in their early stages or niche. Such cryptocurrencies are more volatile and carry higher risks. This is due to their limited presence and potential lack of liquidity. However, they can offer opportunities for substantial short-term gains. Examples of such coins include VeChain (VET) and Synthetix (SNX).
Micro-Cap Cryptocurrencies
These cryptos have the smallest capitalization, below $100 million. These coins are associated with high risk and volatility. Basically, because they are newer and have a limited user base. Investing in such cryptos requires careful research and due diligence. They are more susceptible to manipulation and liquidity challenges.
Conclusion
In conclusion, the market cap measures the total value of all cryptocurrencies in circulation. It is calculated by multiplying its circulating supply by the current price of a cryptocurrency. Also, it can provide insights into the size, potential, and risk associated with different cryptos.
