When you only start investing in crypto you may be confused by the variety of different metrics that are being analyzed in the crypto world. One of them is Market Cap. As a novice trader you may be wondering: what is crypto coin market cap? Market capitalization (or market cap) is the total dollar value of all the coins that have been mined. Market cap is used as an indicator of the popularity of a certain cryptocurrency.
How is market cap calculated?
Now let’s see how to calculate crypto market cap. Market capitalization in crypto is calculated by multiplying the number of coins in circulation by the current price of a single coin. For example, if each coin is being traded at $2, and the circulating supply is 10,000,000 coins, the market cap for this cryptocurrency would be $20,000,000. Market cap changes on an hourly basis and can be very unstable just like the price of a cryptocurrency.
Why is market cap important in crypto?
Cryptocurrency’s value is measured not only by its price. Market cap gives you a more complete view and helps you compare value across cryptocurrencies. It indicates the growth potential of a cryptocurrency and whether it is safe to buy, compared to others. Market cap is an important indicator of coin relevancy.
How to compare market caps in crypto?
You can use CoinSocialStory’s crypto comparison tool to compare market caps of different cryptocurrencies. It also allows you to compare coins by other metrics (like trading volume and social engagement).
How to analyse cryptocurrency market caps?
You can take a look at cryptocurrency market cap graphs on different websites that provide crypto-related data. On these graphs you can see how the market cap of a coin changed over time. You should also consider that cryptocurrencies are classified by their market cap into three categories:
- Large-cap cryptocurrencies have market caps of more than $10 billion. They are considered to be lower risk investments;
- Mid-cap cryptocurrencies have market caps between $1 billion and $10 billion. They have more untapped potential upside but also higher risk;
- Small-cap cryptocurrencies have a market cap of less than $1 billion and are the most risky investments.
Market cap is the best way to measure the crypto’s popularity. Is it true?
As we mentioned earlier, market cap can be used as an indicator of the popularity of a certain cryptocurrency. The market cap shows the popularity of a coin over a longer term. However, you also should consider other important metrics that reflect crypto’s popularity too. For example, the number of social media mentions or social engagement (read our article about crypto social engagement).
In conclusion, market capitalization is one of the most important indicators in the crypto world. However, you should consider other factors and do thoughtful research before investing.