What Is Market Cap in Crypto?
Market capitalization (or market cap) refers to the relative size of a cryptocurrency. To calculate market cap in crypto, you multiply the current price of a coin or token by the total number of those coins that are out there being used.
Market Cap = Current Price x Number of Coins in Circulation
For example, if one unit of a cryptocurrency is being sold for $20.00, and there are 10,000,000 of these coins out in circulation, then the market cap for that cryptocurrency would be $200,000,000.
Now, here's the tricky part: the market cap doesn't tell us how much money is in the market. It's a common mistake to think that way because the market cap is tied to the price. But even a small change in the price can make the market cap change significantly.
For instance, in the example above, if a few million dollars were used to buy this cryptocurrency and raised its price from $20.00 to $25.00, the market cap would jump from $200,000,000 to $250,000,000. But this doesn't mean that $50,000,000 actually flowed into the market.
The amount of money needed to cause such a price increase depends on two other things: volume and liquidity. Volume is about how many of these assets are being bought and sold at a certain time. Liquidity is about how easy it is to quickly buy or sell the asset without making its price change a lot.
What Is the Total Crypto Market Cap?
The total market cap is the combination of the individual market cap of all the listed and active cryptocurrencies on the market like BTC, ETH, SOL, USDT, XRP, MATIC, USDC and others. It provides an up-to-date view of how well the crypto market is doing.
According to CoinMarketCap, the total crypto market cap is currently $1.04T.
Why Is Market Cap Important in Crypto?
The market cap works like a tool that helps investors and traders see the bigger picture and compare the value of different cryptocurrencies. It tells you if a cryptocurrency has the potential to grow and if it's a safe investment compared to other coins or tokens.
How Crypto Market Cap Can Help You as a Trader or Investor
Market cap helps you compare one cryptocurrency's total value with another's. It's like a yardstick to make smarter investment choices.
Cryptocurrencies are divided into three groups based on their market cap:
- Large-cap cryptocurrencies, like Bitcoin (BTC), Ethereum (ETH) and Tether (USDT), have a market cap of over $10 billion. People see them as safer investments because they've shown steady growth and are easier to buy and sell without causing big price swings.
- Mid-cap cryptocurrencies, like Solana (SOL), Litecoin (LTC), and Tron (LTX), have market caps between $1 billion and $10 billion. They have more potential for growth but also more risk.
- Small-cap cryptocurrencies are worth less than $1 billion. They can have wild price swings based on market sentiment.
Josephine Inika
Top 10 Cryptocurrencies by Market Cap
- BTC - $501 billion
- ETH - $195 billion
- USDT - $82 billion
- BNB - $32 billion
- XRP - $26 billion
- USDC - $25 billion
- ADA - $8 billion
- DOGE - $8 billion
- SOL - $7 billion
- TRX - $7 billion
- TON- $6 billion
- DAI - $5 billion
- DOT - $5 billion
- MATIC - $5 billion
- LTC - $4 billion
- SHIB - $4 billion
- WBTC - $4 billion
- BCH - $3 billion
- AVAX - $3 billion
- UNUS LEO - $3 billion
Josephine Inika
Final Word
Market cap shows you a coin or token’s overall value and helps you compare different cryptocurrencies.
But remember, it's just one part of the puzzle. Before you invest, also look at market trends, how stable the cryptocurrency is, and your own financial situation.
Disclaimer: This article was written by the writer to provide guidance and understanding of cryptocurrency trading. It is not an exhaustive article and should not be taken as financial advice. Obiex will not be held liable for your investment decisions.
