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What is cryptocurrency market capitalization?

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If you are new to the world of cryptocurrency, you have come across the term market cap or market capitalization, right? And you have most likely heard that as of November 2021, the total cryptocurrency market cap has reached over $3 trillion, but what does it mean and how does it affect investors and traders?

There is no need to panic as market cap is a simple concept that discusses how big digital currencies or a particular cryptocurrency is. Therefore, we will discuss everything you need to know about market cap, how it is calculated, top 10 largest cryptocurrencies by market cap, and other additional details.

Let’s start!

What is cryptocurrency market capitalization?

By definition, cryptocurrency capitalization or market capitalization is an important parameter used in cryptocurrency markets to determine the total dollar value of a particular cryptocurrency or all digital currencies.

To calculate market capitalization, you need to multiply the current price of a cryptocurrency by its total circulating supply, also known as the amount of the asset currently held in users’ wallets.

Therefore, analyzing market capitalization helps you understand the size and importance of cryptocurrencies within the market. It also allows you to make informed decisions and evaluate the growth potential of other coins.

Cryptocurrency Market Capitalization Categories

Large Cap Cryptocurrencies

Large-cap cryptocurrencies include Bitcoin and Ethereum as they had a market cap of $1.33 trillion and $423.26 billion as of July 2024.

For this reason, many investors believe that companies with higher market capitalizations represent a lower-risk investment, as they have a proven track record of greater liquidity, stability, and growth potential.

Mid-Cap Cryptocurrencies

Mid-cap cryptocurrencies range in value from $1 to $10 billion, which has growth potential but comes with higher risks. Therefore, there is room for more investors, but they should do research on mid-caps before investing without thinking.

Small Cap Cryptocurrencies

Small-cap cryptocurrencies have a market capitalization of less than $1 billion and are the riskiest currencies as they are still in the shadows. However, small caps could skyrocket if market sentiment turns in their favor.

For example, in 2021, Fantom had a market cap of $72,000, but because many investors took a leap of faith, Fantom now has a market cap of $1.41 billion.

Top 10 Cryptocurrencies by Market Cap

  1. Bitcoin (BTC): $1,315,133,586,569;
  2. Ethereum (ETH): $419,830,394,460;
  3. Tether (USDT): $114,253,038,202;
  4. BNB (BNB): $85,100,379,517;
  5. Solana (SOL): $82,009,209,663;
  6. USD Coin (USDC): $34,082,303,375;
  7. XRP (XRP): $33,403,631,522;
  8. Dogecoin (DOGE): $19,521,795,962;
  9. Toncoin (TON): $17,410,910,879;
  10. Cardano (ADA): $15,214,396,717;

Why is cryptocurrency market capitalization important?

Opinions differ on the importance of cryptocurrency market cap. Some argue that market cap leads to a higher risk profile, fear, greed, and market sentiment, while others argue for its power within market dynamics.

However, the middle ground could be this: Cryptocurrency market cap provides an objective view of cryptocurrency market performance, away from marketing tactics and social media endorsements that lead to market manipulation.

Another aspect that can impact market capitalization is the level of adoption of a currency, as widely accepted currencies are used across multiple industries and also have higher levels of trust.

Therefore, market cap can help you make informed investment decisions by diversifying your assets within the cryptocurrency space. However, they do not reflect the same accuracy as that observed in the stock market.

Furthermore, market cap is not the only determinant of a cryptocurrency’s growth potential, and negative news and regulatory overviews could have a significant impact on market cap. On the contrary, positive news can boost investor confidence and market cap. S

Therefore, it is advisable to do thorough research before making any investment decisions, as these factors could artificially inflate or deflate the market capitalization of cryptocurrencies.

The bond on the capitalization and volume of the cryptocurrency market

As we know, market capitalization indicates the market value of a currency, while trading volume shows the level of activity, i.e. buying and selling, and liquidity within the cryptocurrency market.

Therefore, a high trading volume means a higher interest in a particular asset, while a low trading volume means a lack of interest. Simple, right?

As you can see, market caps need to be considered in relation to trading volume. Aiming for a high market cap with a high trading volume is the best way to ensure long-term success, but it is also essential to consider market volatility.

Calculate market capitalization with ease

Calculating market cap is simple. You multiply the current price of a cryptocurrency by its total circulating supply, also known as the amount of assets currently held in the user’s wallet. So, the formula is:

Market Capitalization = Price of Coin x Circulating Supply

The current price can be found on various exchanges, while the total circulating supply should always be available on the project website.

Let’s take a practical example.

For example, if Bitcoin’s market cap is $67,498 and its circulating supply is 19.73 million, then its market cap is $1.33 trillion.

However, it is essential to understand that the market capitalization may vary depending on the data source as different exchanges may have different values. cryptocurrency pricesAdditionally, some coins may have a cap, meaning that the total supply in circulation will not increase over time.

In the case of Bitcoin, the maximum supply is 21 million, which means that its market cap is limited and only increases if the price increases.

What is the total market capitalization?

Total cryptocurrency market capitalization represents the total market value of all cryptocurrencies available through market data. Therefore, you can get a real-time picture of how the entire cryptocurrency market is behaving.

Another important metric of total market cap is total supply, as altcoins have a finite supply, such as Bitcoin, which has 21 million coins. However, other altcoins may have a much larger total supply, such as XRP, with 1 billion.

Additionally, coins with a larger total supply are usually less expensive, as scarcity is a critical factor in the total value of a cryptocurrency. Therefore, when analyzing your cryptocurrency portfolio, it is best to rely on market capitalization rather than the price of each digital asset.

Then there is the circulating supply, also known as the fully diluted supply, which includes all cryptocurrencies available to the public.

1. CoinGeko

CoinGecko It is considered one of the best cryptocurrency analysis tools. It offers a detailed overview of digital currencies and is often used to gain a deeper understanding of market dynamics and volatility.

You can use CoinGeko to conduct in-depth research on cryptocurrencies, crypto exchanges, NFTs, while also learning more through insights, news, cryptocurrency reports, podcasts, and more.

2. CoinMarketCap

Did you know that CoinMarketCap was the first to popularize the use of a coin’s market capitalization to classify cryptocurrencies?

Therefore, CoinMarketCap is the most reliable and accurate source for cryptocurrency market capitalization, cryptocurrency prices and other highly relevant information globally.

3. CryptoCompare

CryptoCompare is a leading provider of data, research and analysis on the cryptocurrency market, offering transparent information to all cryptocurrency investors and traders.

Additionally, CryptoCompare offers detailed reviews of cryptocurrency exchanges and monitors the market from multiple perspectives, such as geographic and other anomalies.

Market Cap FAQ

What is the current cryptocurrency market cap?

The total market capitalization is $2.42 trillion as of July 23, 2024.

Why is cryptocurrency market capitalization important?

Cryptocurrency market capitalization provides an objective overview of the cryptocurrency market performance, away from the marketing tactics and social media endorsements that lead to market manipulation.

What was the highest cryptocurrency market cap ever?

Total market capitalization reached an all-time high of $3 trillion in November 2021.

How is market capitalization calculated?

Market capitalization is calculated according to the following formula:

Market Capitalization = Price of Coin x Circulating Supply.

Final Thoughts on What Is Cryptocurrency Market Cap

In conclusion, understanding market cap is a crucial first step in navigating the often complex world of cryptocurrency investing. By considering market cap alongside other factors such as trading volume, you can make informed decisions about your cryptocurrency portfolio. Remember, thorough research is essential and market cap is just one piece of the puzzle.

* The information contained in this article and the links provided are for general information purposes only and should not constitute any financial or investment advice. We recommend that you do your own research or consult a professional before making any financial decisions. Please acknowledge that we are not liable for any loss caused by any information on this website.



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