What is Cryptocurrency Market Cap?

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Capitalisation is a financial characteristic that determines the total value of a certain type of asset in circulation. It is widely used to evaluate traditional securities and cryptocurrencies, but it has its own characteristics regarding the latter.

Novice investors do not know how to work out market cap crypto? In fact, it is elementary. It is calculated by multiplying the number of shares (in our case, coins) by the cryptocurrency exchange rates. For example, if 1 million coins of a particular digital currency worth $10 each have been issued now, their capitalization would be $10 million.

How to Work Out Market Cap Crypto?

Capitalisation and crypto rates should not be confused: these are two different, albeit related, parameters. The outflow of capital inevitably entails a fall in coin quotes, and new infusions, respectively, stimulate their growth.

It would seem elementary, but novice crypto investors can confuse these two terms. And without this basic knowledge, it is impossible to trace correlations and build an investment and, even more so, a trading strategy. Financial indicators and their ratio are very important for analyzing and forecasting the market situation. When determining the real value and potential of stock assets, the following are taken into account:

  • the ratio of the exchange rate and profitability;
  • earnings per share;
  • profitability growth rate;
  • liquidity ratio, etc.

In the crypto market today, it is not customary to publish financial statements. It increases the value of available digital project data. One of the main “open” parameters is capitalisation, based on which you can quickly assess the value of specific cryptocurrencies.

What is Cryptocurrency Market Cap Today?

So, just looking at capitalisation allows you to say a lot about each cryptocurrency and the market as a whole. For example, the capitalization of Bitcoin is twice the capitalization of Ethereum, which is ranked second in the ranking, and almost 19 times more than that of Ripple (XRP).

As of the end of 2022, the Bitcoin dominance rate is 39.9%. Only 37 crypto coins today can boast more than $1 billion in capitalization. By and large, the lion’s share of the capital invested in the crypto economy serves the benefit of several dozen projects. Meanwhile, the number of active cryptocurrencies exceeds 22 thousand, according to the Coinmarketcap global rating.

Almost all resources about cryptocurrencies keep track of the capitalisation of each coin separately, as well as general market indicators. In particular, on the main page of the already mentioned Coinmarketcap service. As of the end of December 2022, the total capitalization of the cryptocurrency market is $810 billion. In addition, these indicators can be tracked in the personal account of the WhiteBIT cryptocurrency exchange.

What Does the Level of Capitalisation Affect On and How?

The higher this most important indicator, the more resistant the currency is to volatility. The course of cryptocurrencies with a low level of capitalisation has an increased sensitivity to the news background, as well as large financial agreements, which are sometimes made by the “whales” of the industry. Most often, they do this to manipulate a particular coin’s value.

Thus, the owners of little-known tokens can suffer from the actions of large traders with a greater probability than the owners of BTC, ETH or XRP. And if we imagine a situation in which the “whales” agree among themselves and at the same time sell some x-coin with a small capitalisation, it may simply cease to exist. In such cases, you can see one swift red candle down on the cryptocurrency rates live charts.

Decentralization or Coin Distribution Indicator

Everyone can find out the indicator of the market capitalization of a currency, but information about who exactly owns it and in what parts almost always remains closed. It is one thing when most of the assets are dispersed in the hands of private investors, and quite another if they are owned by the “whales” or the founders of the project themselves – then all the power is with them.

In this case, several people can direct the project in the desired direction, manipulate the cost, even create the illusion of the well-being of their currency for a long time, and then close the project one day. It has nothing to do with decentralization.

Wrapping Up

Sufficient capitalisation is, of course, evidence of strength. But this indicator should not be given decisive importance when deciding to invest. After all, almost all assets may be concentrated in only one hand. By the way, Ripple is constantly and not without reason, subjected to this reproach. To have a clear picture of an asset, it is better to pay attention to the daily trading volume.