What is a Crypto Market Cap?
Discover what a crypto market cap is and what it means as an investor looking to invest into a particular asset.
Market capitalization, or market cap, is the amount by which the value of a cryptocurrency is measured. In other words, this is an indicator for measuring the popularity of a particular coin.
Ideally, the capitalization of the coin should be as high as possible, as this raises its value in comparison with other coins. That is why capitalization is one of the most important indicators of the value of a cryptocurrency.
How to calculate market cap
Consider an example of calculating market capitalization:
Price (value in fiat currency) x circulating supply = Market capitalization.
To avoid counting manually, there are many electronic tools available today for tracking market capitalization. This helps beginners and experienced investors to keep track of changes in the cryptocurrency market, especially with frequent changes. Such services are built on the analysis of the most popular cryptocurrency exchanges.
This information gives the investor an awareness of the cryptocurrency in the long run.
Most popular coin investing
Investing only in the most popular coins is not the most profitable tactic on the market. Many experienced traders advise to study less popular coins every day, as their growth on the exchange is often rapid, and trading in such coins brings high profits. Such trading tactics will reduce the risk of losing large amounts, and also prevent the rapid loss of altcoin positions.
Market capitalization is constantly changing, therefore it is necessary to keep a close eye on this. However, for this same reason, some experienced traders advise limiting investments in cryptocurrencies, due to the risk of losing everything.
Even though that risk is present, the crypto space has matured by leaps and bounds since 2008, with institutional involvement being a main contributor. Crypto and blockchain technologies aren’t going away anytime soon.
Is market cap the best way to measure popularity?
Experienced traders often criticize the principle of measurement because market capitalization draws a clear line between “reliable” coins and “unreliable”. During this period, beginners make more investments in safe coins than depreciated altcoins. This is called a conservative strategy, and it allows safe coins to keep a high price in the market and prevent altcoins from building competition.
Although some altcoins have more potential for growth. There are mid-cap coins that significantly reduce their potential growth due to the presence of volatility. However, compared to coins with a higher capitalization, they have better growth rates.
Also, there are coins with the smallest market capitalization, due to the fact that they are extremely volatile. Such coins are considered extremely risky investments. Their change in price can be carried out every few seconds, and it is quite difficult to predict its growth or fall.
Conclusion
The first thing to remember is analysis. Analyze, research and study each cryptocurrency before investing in order to avoid a precipitous fall. It must be remembered that market capitalization is not the only indicator, as there is trading volume and real-world utility to name a couple.
Therefore, prepare well before your first investment, and celebrate the first profit. You are on a journey towards your financial goals, and each step along the way is an important part of the learning process.
Related articles
What is DeFi?
What is a DAO?
Altcoin Types and Real-World Use Cases
Author:
Ken Melendez
✍️ Head of Content @ Cindicator
📊 Certified Bitcoin Professional
🔐 Blockchain Chamber - Chapter President
Who is Cindicator?
Cindicator is a world-wide team of individuals with expertise in math, data science, quant trading, and finances, working together with one collective mind. Founded in 2015, Cindicator builds predictive analytics by merging collective intelligence and machine learning models. Stoic AI is the company’s flagship product that offers automated trading strategies for cryptocurrency investors. Join us on Telegram or Twitter to stay in touch.
Disclaimer
Information in the article does not, nor does it purport to, constitute any form of professional investment advice, recommendation, or independent analysis.