Crypto Glossary

Posted on September 15, 2021 in
Glossary

Market Capitalization

The total dollar value of all the shares of a company’s stock — or, in the case of Bitcoin or another cryptocurrency, the total dollar value of all the coins that have been minted — is known as the market capitalization (or market cap). When it comes to cryptocurrency, market capitalization is derived by multiplying the total number of coins that have been mined by the current price of a single coin.

What is market capitalization?

The total dollar market value of a company’s outstanding shares of stock is referred to as the company’s market capitalization. The total value of a company’s outstanding shares multiplied by the current market price of one share yields the market capitalization, which is sometimes referred to as “market cap.”

As a rule of thumb, market capitalization is equal to the current price multiplied by the amount of circulating supply currently available. Example: If one unit of cryptocurrency is valued at 30 Baht and the total number of coins in circulation is equivalent to 1,000,000 coins, the market capitalization of that cryptocurrency would be 30,000,000 Baht. 

While the market capitalization of a company or cryptocurrency may provide some insights, it is crucial to remember that market capitalization is not the same as money influx. As a result, it does not accurately represent the amount of money in the market. The assumption that the calculation of market capitalization is directly dependent on price is a frequent fallacy, but the fact is that even a very modest movement in price can have a considerable impact on market capitalization.

Why is market capitalization important to cryptocurrencies?

Cryptocurrencies, in contrast to traditional assets such as cash or equities, are unregulated and completely decentralized in nature. In other words, the supply of coins on the market is totally controlled by the community, which is composed of miners. This means that the market capitalization of a cryptocurrency can be used to determine the presence of a certain cryptocurrency in the market. 

If you refer back to the formula, you will recall that it is as follows: Market Capitalization = Current Price x Circulating Supply. The greater the amount of a cryptocurrency circulating supply is in the market, the more dominant that cryptocurrency is in the market. As a result, the market capitalization of a cryptocurrency is frequently used as an indicator of its popularity in the market. 

Highest cryptocurrency market caps

Bitcoin is the world’s oldest and most popular cryptocurrency, with a market capitalization of about $1 trillion and a history dating back to the late 2000s. Given how radically cryptocurrency prices fluctuate from day to day, this statistic is subject to alter at any time without notice. Ethereum, which has a market capitalization of over $165 billion, is the closest competitor to Bitcoin. This should come as no surprise given the fact that Bitcoin is the most widely acknowledged cryptocurrency in the world.

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