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What is Market Capitalisation?

What is Market Capitalisation?

The crypto industry is vast, that is true. But did you know that cryptocurrency is not infinite and coins have a fixed amount? That is exactly what market capitalisation is working with. Today we will discuss it in more detail as well as see how you can use it to your advantage!

If we talk about the crypto industry, the term market capitalisation, or market cap, refers to the total value of the entire supply of a particular cryptocurrency issued on the market.

The main idea behind market capitalisation — it can help you understand the demand for a certain cryptocurrency on the market. In a nutshell, a cryptocurrency with a large market cap usually has more trust among the users and therefore may have higher perspectives.

How is market cap calculated?

The calculations are done following the simple formula:

Market Cap = Current Currency Price x Total amount of currency issued

For instance, let’s take a currency that is issued in the amount of 5,000,000 coins and is traded at $5 per unit. Using the formula, we can see that its market cap would be $25,000,000.

What types of market cap are there?

All cryptocurrencies have different market capitalisation measures and in general are divided into three categories:

  • Large-cap cryptocurrencies

    These are assets like Bitcoin and Ether that have a market cap of more than $10 billion. Investors tend to believe these are low-risk currencies. They have higher liquidity and can withstand a higher volume of users with no significant change in price.
  • Mid-cap cryptocurrencies

    Their market cap is $1-10 billion. It is believed that such currencies have a good potential for growth yet their investment risk is much higher than large-cap ones.
  • Small-cap currencies

    Their market cap is less than $1 billion and they are most susceptible to big swings in price rates.

How to utilise market cap?

Market cap is one of the main tools for cryptocurrency evaluation. Together with it, you can also look more into:

  • Company and the team behind the currency

  • Social media

  • Reviews

  • The company’s overall actions

These actions can help you see whether people trust this company while also discovering its cryptocurrency’s potential.

Market capitalisation is key to a safer investment. Now knowing what it is and how it works you can be more confident with cryptocurrencies and make the best decisions for yourself!

NC WALLET

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