Academy Crypto Basics

What is market cap and how to calculate it

Market cap or market capitalization is an indicator that tracks and measures the cryptocurrency market value. It is widely used as a dominance marker and speaks of the cryptocurrencies popularity level. This indicator is broadly used by the investors before making commiting to sell/buy a particular token.

Typically, the higher the market capitalization of a cryptocurrency, the more dominant presence it is considered to have in the market. On this account, market capitalization is often viewed as the most important indicator for cryptocurrency ranking.

Market capitalization formula:

Market capitalization = price x circulating supply.

Coinmarketcap is the biggest aggregator of information on crypto projects and the largest cryptocurrency rating source due to the market capitalization. All price calculations here are based on the weighted average volume of indicators from a number of different exchanges.

Circulating supply, total supply and maximum supply

Another important marker to consider is a circulating supply. This is the approximate number of tokens on the market, coming from both buyers and sellers. Not to be mistaken for the total supply which essentially is the total amount that exists at the moment, minus all the burned tokens.

Total Emission or Maximum Supply – the maximum number of tokens that will be minted.

The circulating supply is the indicator you need to pay attention to when dealing with crypto, the best for determining market capitalization. Tokens can be minted, but locked up for public sale, you will see this when comparing the total and circulating supply.

Large cap cryptocurrencies of $ 10B or more are generally considered as safe cryptocurrency investments. Investing in such coins is part of a conservative long-term strategy. Such tokens are less volatile than shitcoins, but still more volatile, and, as a result, more profitable, than stocks and bonds.

Mid-cap cryptocurrencies are more risky but tend to have much more upside potential than $ 10B + cryptocurrencies.

Small-cap cryptocurrencies are often extremely volatile and are considered as very risky investments, albeit sometimes with large potential (short-term) gains.

We kindly remind you to perform the analysis of your making an investment decision concerning any kind of crypto project and check Coinmarketcap price charts and other important criteria beforehand.

More trading tips and tricks to be revealed in the following articles!

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