What is a market cap?

For Beginners

What is a market cap?

Market capitalization (market cap) is the total value of a given asset currently in circulation. For cryptocurrencies, it means the current value of all mined coins of one variety. Knowing the market cap for a particular market might be hugely beneficial, although the relevance of this parameter as an analysis tool has been widely criticized, especially when applied to crypto.

Calculating Market Cap

Market cap can be calculated by multiplying the current market value of an asset by the number of units of this asset currently in circulation. For crypto, it means all mined coins of this variety up to this point. An alternative, easier way to know what the market cap is for a specific cryptocurrency is to visit platforms like CoinMarketCap, where it’s continuously tracked for all relevant coins.

Importanсе of Market Cap

By assessing market capitalization, you can determine whether a market is worth investing in. You shouldn’t rely solely on this parameter to assess such things, but it can be useful if you want a general picture. Several levels of market cap can tell you something about a market:

Large-cap cryptocurrencies are crypto coins with a market capitalization of more than 10 billion USD. Such cryptocurrencies are considered the least volatile, and it’s generally sound to invest in them on account of their long, successful cost records.

Mid-cap cryptocurrencies are crypto coins with a market capitalization of 1-10 billion USD. These come with a lot of potential but also increased risks for investors.

Small-cap cryptocurrencies are a large multitude of smaller crypto, which are less predictable and pose a lot more risk to investors.

Once again, it’s unwise to base your opinion only on market cap or on any one indicator for that matter. Consider market trends, current volatility, and other parameters when making a decision. 

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