The crypto market can be rather confusing, especially if you are not yet the top gun in the sphere. Tackling the obscurity of this new-ish and actively developing market is easier once you are aware of essential metrics that indicate the value and outlooks of your assets. One of those metrics is Market Capitalization — the topic of this article by KvaPay.
Market Cap is an essential metric in the crypto market, the same as in the stock market. This straightforward tool tells us a lot about digital assent’s size, performance, and potential.
Overview
Market cap, or capitalization, represents the total value of a single cryptocurrency. Calculating it in different moments helps in understanding the way that value changes as well as the overall significance of a cryptocurrency.
The formula for the market cap is very straightforward:
Market Cap = Current Price X Total Supply
A fictional example
The cryptocurrency is priced at $50 and has a total of 1 million coins. That means that its market cap is $50 million.
As time goes by, more coins are mined. Miners were so active that the total amount of coins is 2 million now. The price of a single coin stays at $50. With these new numbers, the market cap becomes $100 million.
A real example
We will compare Bitcoin’s market cap on Jan 1 2015 and 2020 to demonstrate this principle. As you can see, the overall capitalization of Bitcoin increased more than 30 times in just five years.
| Year | 2015 | 2020 |
| 1 BTC price | $314.25 | $7,200.17 |
| Circulating supply | 13,675,575 BTC | 18,135,787 BTC |
| Market cap | $4,297,535,254.01 | $130,580,829,149.59 |
Why Is This Important?
People argue if the crypto market cap is a metric worthy of consideration. In Bitcoin’s case, not so much — it is commonly known that Bitcoin is the biggest and most expensive crypto. However, there are smaller altcoins that need some deeper examination.
Some might make a seemingly obvious conclusion that Bitcoin Cash is more attractive than Ripple because it is priced so much more. Hold on, because the Bitcoin Cash market cap is 3.4 times smaller than that of XRP’s!
It provides us with a better understanding of the overall weight of these cryptos than just comparing prices or hype on social media. Remember: having a data-driven approach to crypto investment is always better than making emotional decisions.
There are other factors to consider when choosing an altcoin for investment.
Read our Top Altcoins with The Greatest Potential in 2024.
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