What is the market capitalization of cryptocurrencies?
Updated: Apr 14
In the crypto industry, the term market cap stands for market capitalization and refers to one of the most important metrics that measure the relative size of a cryptocurrency. After token prices, it is the first parameter investors look at when evaluating an asset.
In other words, market capitalization is the measure to analyze the prospects of a crypto project thanks to the insights that it can offer. The market cap indicates the growth potential of an asset and whether it can be safe to buy.
It is calculated by multiplying the price of a specific crypto asset at any given time by the total number of tokens and coins in circulation, also known as circulating supply.
The formula is Market Cap = Current Price * Circulating Supply
It’s essential to take into account
the market cap does not represent how much money is in the market;
Cryptocurrencies are volatile assets, and their market cap can fluctuate dramatically (pumps and dumps are frequently).
This means that the value of the market cap could vary according to the current price.
Understand MarketCap and its related misconceptions.
Categorizing cryptocurrencies regarding their market cap
To make more informed investments, it is important to know that the market capitalization value is a very important parameter that allows you to compare the total value of one cryptocurrency with another.
Market capitalization’s value ranks cryptocurrencies in three categories:
Large-cap cryptocurrencies include assets with a market cap of more than $10 billion. They are considered a lower-risk investment.
Mid-cap cryptocurrencies with market caps between $1 billion and $10 billion. Usually, these cryptocurrencies are considered a higher potential investment and, at the same time, higher risk.
Small-cap cryptocurrencies with a market cap of less than $1 billion. This category is considered to be more susceptible to market fluctuation.
How much is the total market cap of cryptocurrency?
The total market cap depicts the total value of altcoins, stablecoins, tokens, and all other crypto assets on the market combined. Many deem this metric important, as it indicates the size of the industry as a whole (on 10/10/2022, the global crypto market cap is $934.37B). Due to the relatively high volatility of the cryptocurrency markets, the values tend to shift around quite a bit.
The combined crypto market capitalization is often compared with other sectors, such as precious metals or stocks because they can provide a rough estimation of where the total crypto market could grow in the next years and decades.
Diluted crypto market capitalization
To estimate a network's future value, we need the value of the diluted market cap. This term is taken by the stock market and represents a company's valuation if all stock options are exercised and all securities are converted to stock.
It’s crucial to remember that not all cryptocurrencies, tokens, and assets have their entire supply available now. For example, bitcoin. We know there will be a maximum of 21 million bitcoin. Today, it has a circulation supply of 19.175 million bitcoin. This equals a market cap of roughly $369.1 billion at around $19,240 per BTC.
Calculating the diluted market cap would take the maximum supply of Bitcoin into account instead. We take 21 million and multiply it by the current BTC price of $19,23. The outcome of this sum is the diluted market cap of Bitcoin, which equals around $404 billion.
This same concept can be applied to all other crypto assets on the market. A diluted market cap simply takes an asset's current price and multiplies it by the maximum supply to circulate.
When you decide to invest in a cryptocurrency, you have to consider several parameters, not only the value of its market capitalization, as we understood it to be a variable factor. The cryptocurrency’s stability, liquidity, circulation supply, daily, weekly and monthly performance, trends and your own financial situation are all useful parameters that allow you to reduce the risks of wrong investments.
What exact parameters do you use your investment on?