What Is a Cryptocurrency Market Cap?
Aug 10, 2021
The cryptocurrency industry speaks with a glossary of terms that can make crypto trading feel like an inaccessible field. But don’t be deterred– crypto lingo is easy to grasp as long as you’re willing to learn its many unique words, terms, and phrases, and is necessary to understand before jumping onto a cryptocurrency exchange.
Cryptocurrency Market Cap
One of the most important metrics to understand regarding the cryptocurrency markets is a cryptocurrency market cap. A cryptocurrency market cap is:
- Also known as market capitalisation: Market capitalisation is the known market value of a particular cryptocurrency. It can be calculated as the total supply of coins in circulation multiplied by the price.
- The total value of a particular cryptocurrency: The total value of a cryptocurrency is usually defined in accordance with a government-issued CBDC / fiat currency. For ease of understanding and utility, most cryptocurrency market caps are defined in US Dollars.
- An indication of the cryptocurrency’s stability: Market volatility is a known and expected part of almost every trading environment. Cryptocurrency market caps can indicate the estimated long-term stability of a particular type of cryptocurrency, with higher crypto market caps being a moderate predictor of stability.
Cryptocurrency Market Activity
It’s interesting - and somewhat exciting - to monitor cryptocurrency market activity. As a relatively new market for traders, the cryptocurrency market attracts much attention and interest. Every cryptocurrency market cap may include 2 sets of figures:
Cryptocurrency circulating supply market cap: This is the total amount of a particular cryptocurrency in circulation, at a particular point in time. For example, this figure outlines how many Bitcoins have been mined so far.
Cryptocurrency fully diluted supply market cap: This is the maximum amount of a particular cryptocurrency that will eventually be in circulation. In the case of Bitcoin, only 21 million Bitcoin will ever exist. Therefore, the fully diluted supply for Bitcoin will reflect the currency value of 21 million Bitcoin.
Types of Cryptocurrency Market Caps
There are three types of cryptocurrency market caps by which cryptos are broadly organized:
Large-cap: Cryptocurrencies with larger market caps are viewed by many industry insiders as more reputable. They’re relatively easier to trade with, and are easily accessible for traders and investors. Large-cap cryptocurrencies traditionally carry a market cap of more than $10 billion.
Medium-cap: Medium-cap cryptocurrencies are assigned a market cap of between $1 billion and $10 billion. They’re more volatile, and can offer more growth potential as their prices may swing up or down, quite quickly.
Small-cap: Smaller cryptocurrencies typically carry the most risk for traders and investors. It may also be difficult for traders to access them, as they may not yet be adopted by major trading platforms. Typically, small-cap cryptocurrencies carry a market cap of $1 billion or below.
An important point to be made though, is that cryptocurrencies are all volatile and none are considered, by mutual consensus, as ‘stable or safe investments’ at this nascent stage of the market. All trading and investing done in cryptocurrency is done at your own risk.
Why a Cryptocurrency Market Cap is Important
As a cryptocurrency trader, you’ll want to make informed choices about where to direct your attention. By comparing cryptocurrency market caps, you’ll be equipped with one of many factors to consider when making trading decisions. Understanding cryptocurrency market caps can help you to assess risk, understand moves in the market, and hedge against market volatility.
Start your cryptocurrency journey with MEX Digital. Remember, proper diligence and sound judgement should be used in evaluating the risks associated with these activities. Trading cryptocurrency carries significant risk and losses can exceed deposits. Refer to our Terms and Conditions and disclosure material.
This is not financial advice.