Nicole is a professional journalist with 20 years of experience in writing and editing. Her expertise spans both the tech and financial industries. She has…
Market capitalization (or market cap) is a financial metric that can be used to indicate the total value of a cryptocurrency.
It has traditionally been used to measure the market value of companies traded on stock exchanges, and now has become a key metric for assessing the relative size and importance of different coins and tokens.
Cryptocurrencies with larger market values tend to be more established and less volatile than coins or tokens with smaller market values.
The formula for calculating market cap is simple:
Market cap = current price per coin/token × total circulating supply
The current price refers to the most recent price at which the cryptocurrency is being traded on various exchanges.
The total circulating supply refers to the total number of coins or tokens of that cryptocurrency that are currently in circulation and available to the public.
Market capitalization is typically expressed in US dollars or another fiat currency.
For example, at a price of $1.43 and circulating supply of 3.43 billion, Toncoin (TON) had a market cap of $4.9 billion at the time of writing.
THORChain (RUNE) was trading slightly higher at $1.54 with a circulating supply of 340 million and a market cap of $523 million.
Understanding a market cap is useful in analyzing cryptocurrencies for several reasons.
While market capitalization can be a useful metric, it does have its limitations:
Market capitalization is a useful metric in that provides a snapshot of a cryptocurrency’s relative size and significance in the market, which can assist users, traders and investors in making informed decisions.
However, it should be used in conjunction with other metrics and factors to form a comprehensive view of a cryptocurrency’s potential and risk.
As the cryptocurrency markets continue to evolve, understanding the key metrics and terminologies is important for seasoned investors and newcomers alike.
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Nicole is a professional journalist with 20 years of experience in writing and editing. Her expertise spans both the tech and financial industries. She has developed expertise in covering commodity, equity, and cryptocurrency markets, as well as the latest trends across the technology sector, from semiconductors to electric vehicles. She holds a degree in Journalism from City University, London. Having embraced the digital nomad lifestyle, she can usually be found on the beach brushing sand out of her keyboard in between snorkeling trips.
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