Definition
The market capitalisation (or market cap) of a cryptocurrency like Bitcoin is the total value of all coins that have ever been mined in the system. You reach this number by multiplying the value of one single Bitcoin by the total number of coins in circulation.
Market cap = Price of one single coin x Total number of coins in circulation
As of April, 2021, the total market cap of Bitcoin is just over $1 Trillion. that is…
18,681,025 Coins in circulation multiplied by $60,006.80 price per coin = $1,120,867,813,126 market cap.
For all of today’s market caps, see our live prices and data.
As a general rule of thumb, cryptocurrencies with larger market caps are considered more stable than those with smaller market caps. This is because, just as larger ships can better navigate rough weather, larger cryptocurrencies can better withstand the volatility of turbulent markets. Cryptocurrencies with smaller market caps, on the other hand, are more susceptible to the whims of large asset movements by institutional investors with massive asset portfolios.
Is market cap important?
Market cap gives a prudent investor a more complete picture of a cryptocurrency’s position in a market. Of course, there are other statistics that are relevant too, such as price, volume traded and percentage change, all of which help to evaluate an assets value. But, the market cap helps investors to compare different cryptocurrencies with each other. It is a key statistic that can indicate the growth potential of a cryptocurrency.
It is important to remember that cryptocurrency prices are subject to volatile movements, and no statistical metrics or technical indicators can predict the future price movement of any asset with 100% accuracy. Market trends, cryptocurrency stability and your own financial situation are all important factors that need to be considered when evaluating the risks of an investment.
Let’s take a closer look
This metric can be broken down into a further three categories. These can help you compare cryptocurrencies so that you can make better informed financial decisions.
- Large-cap cryptocurrencies such as Bitcoin and Ethereum, which are the two largest cryptocurrencies by market cap. They are considered to be lower risk investments with high liquidity and a track record of sustained growth over longer duration. A high liquidity means they can withstand a higher number of people cashing out without affecting the price.
- Mid-cap cryptocurrencies have market caps between $1 billion and $10 billion and have a higher risk but may also have untapped potential.
- Small-cap cryptocurrencies have a market cap of less than $1 billion and are considered the highest risk category. They have the most volatile price movements as they are more susceptible to market sentiment.
