What is Coin Market Capitalization?
Basically, market capitalization (market cap) is a mathematical technique for determining the value of a cryptocurrency.
Currently, the total cryptocurrency market cap is $140.835.299.306.
In a stock market, market capitalization simply defines the current share price multiplied by the total number of existing shares.
Calculating The Market Cap
Cryptocurrency Market Cap = Total Current Coins * Current Price
When calculating the market cap, we need to know the total current coins (Circulating Supply in coinmarketcap.com)
and current USD price.
Let’s see an example:
BTC Market Cap = Total Current Coins * Current Price which is 17.598.525 BTC * $4.063,09
It equals $71.504.390.942,25 .
Why Market Cap is Important?
First of all, it is very important for the investor to understand the size of the coin.
Secondly, when you want to compare a coin with another, market cap is the key factor for it.
As they are different types of market caps, comparing a large cap coin with a low cap will not give you the right analysis.
As a result, comparing them with a mathematical approach will not give you the right point.
Knowing the market cap let you know the risk and reward.
Large market cap coins have less risk but less reward also.
Low market cap coins have more risk and more reward.
So you can balance your portfolio easily if you know it.
Finally, you can also use market cap to take snapshots of company or cryptocurrency groupings.
For example, take the privacy coins, calculate their market caps, and add them all together.
You will see the value of privacy coins in the cryptocurrency market.
On the other hand, only market cap can’t give us the analysis of a cryptocurrency.
There are lots of parameters to evaluate a coin such as technology, team, partnerships, community, decentralization etc.