Mar 11, 2019 20:55 UTC
Apr 30, 2019 at 08:48 UTC
What is Market Cap In Crypto and Why Is It Important?
You must have heard of the term “market cap” in relation to the performance of cryptocurrencies. If you are one who is somewhat uninitiated in the field of crypto, you may find this term a little difficult to understand. However, if you are someone who is hoping to get into trading crypto, this is a major market indicator you absolutely have to be aware of. So, let us now find out: what is “market cap” in cryptocurrency and why is it relevant?
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For traders in the traditional markets like stocks, market cap is a frequently used indicator.
The meaning for this term across the stock markets and crypto markets is quite similar. Even so, it does have some interesting implications for the crypto market which we will now dissect.
What is Market Cap?
Market Cap is the short term for “market capitalisation”. This particular metric reflects the total value of a certain security or asset.
In order to calculate the market cap of a certain cryptocurrency or even the entire crypto market, one must ideally multiply the total circulating supply of the said cryptocurrency or the overall market by the current price of each unit.
For example, if a certain coin has a circulating supply of 25 tokens and is priced at 5 dollars each, then its market cap will be equal to 125 dollars. Of course, this is a puny example in comparison to the actual size of the market cap of leading cryptocurrencies.
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For example, at the time of writing, data sourced from Coinmarketcap suggests that Bitcoin has a total market cap of 68.58 billion dollars, its supply being 17.58 million and its price being $3,900.43.
Why is Market Cap Important For Crypto?
The current market cap for the whole of the crypto market is currently over $132 billion. How does it help us in any way?
It helps because it makes us realize the position of crypto relevant to the rest of the world of financial instruments and securities. To put it in perspective, top mainstream tech firm Apple currently boasts of a total market of 843.56 billion dollars, which is many times the size of the entirety of the crypto market.
Earlier this year, the Winklevoss Brothers claimed that Bitcoin will one day surpass the market cap of gold.
Given the market cap of gold remains upward of 7 trillion dollars, that seems unlikely. In any case, it helps us understand how much more space the crypto market has, to grow.
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