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Highlights
- Market capitalisation indicates a mathematical technique for determining the value of a cryptocurrency.
- It is an indicator of the dominance or popularity of a particular cryptocurrency.
- Market cap is calculated by multiplying the total number of circulating coins with its current price.
Market capitalisation in crypto is a mathematical technique that is used to establish the value of a cryptocurrency. It is an indicator of the dominance or popularity of a particular cryptocurrency. Often the market cap of a particular cryptocurrency is a good indicator or the position of the crypto and is often considered a key indicator before making trading decisions.
While in the traditional stock market, the market cap would indicate the total dollar market value of a company's outstanding shares of stock. While the market cap of the company is calculated by the number of shares by its price of one share.
However, the market cap is calculated in the cryptocurrency scenario by multiplying the total number of circulating coins with its current price. For example, if a cryptocurrency is being traded at US $10 and its circulating supply is 10,000,000 coins, then the cryptocurrency's market cap would be US $100,000,000. While the market cap does indicate the size and performance of particular crypto, it doesn't necessarily mean that volume is getting generated in enough quantity. In fact, active transactions could pump up the price from US $10 to US $12, which could also see a bump in the market cap.
Does Market Cap refer to popularity?
In a way, the market cap reflects the popularity of crypto in the long run. For example, Bitcoin and Ethereum have a market cap of US $932,956,084,945 & US $389,953,021,180 as per CoinMarketCap, reflecting that they are the two most popular coins in the crypto industry. However, this theory doesn't hold in every case. Though Bitcoin and Ethereum are the two dominant cryptocurrencies in the market, traders and investors have also shown active interest in other coins such as Dogecoin and other altcoins.
Though the market is still in its infancy and highly volatile, a cryptocurrency with a larger market cap tends to be more stable than a mid-market or smaller market cap. Mid-cap cryptos, even though they are volatile but they have greater potential than large-cap cryptos. Small-cap cryptocurrencies are considered to be highly volatile and deemed to be risky investments.
Crypto Market Cap sees an increase.
Monday's cryptocurrency rally saw the market cap reach 2.17, up by 1.1%. This was largely due to the rallies seen by various cryptos such as Bitcoin, which registered a 5.69% gain, Cardano, which registered a 31% gain, Dogecoin, which saw a 5.24%, etc. as per CoinMarketCap.
Conclusion
Cryptocurrency market capitalisation provides a long-term perspective and a short-term perspective to take a well-informed decision before investing. Although the prices vary from day to day, the market cap also gives the idea about particular crypto is a large-cap, mid-cap or small-cap crypto.
