What Exactly Is Market Capitalization?

How does market capitalization affect your choices when trading Cryptocurrencies? What exactly does that number mean?

• Should you only invest in cryptocurrencies with a big market cap?
• The one big trick to investing in small-cap cryptocurrencies

This is one definition that means the same thing for all types of financial instruments. How much does the whole thing cost? The market capitalization is the total of all the parts. How much a cryptocurrency’s market capitalization is can help you figure out how much that cryptocurrency is worth compared to other cryptocurrencies. I like to look at it this way, just like there are different kinds of precious stones and metals that are worth different amounts. There are also different types of cryptocurrencies with different values compared to each other.

People think that a diamond is one of the most valuable gems on Earth. People think that gold is one of the most valuable metals on Earth. How much gold it would take to equal the value of a good 1 carat diamond can help you understand how market capitalization is used to figure out how much a cryptocurrency is worth. Most of the time, the weight of the gold that would be needed to equal the value of a good diamond will be more than the weight of the diamond itself.

Bitcoin has the largest market capitalization of all the cryptocurrencies.

At the time this was written, the market capitalization of Bitcoin was worth about $448 billion USD. With a market capitalization of about $226 billion, Ethereum comes in second. And just like gold will be heavier than a diamond of the same value. To equal the value of 1 Bitcoin, you need more Ethereum coins.

To figure out the value of the market capitalization. You must multiply the number of coins in circulation by the price of a coin on the market right now. The best way to figure out the value of market capitalization is to look at the circulating supply. The only coins that can really change the value of the currency are the ones that are already in circulation. Since they are the only coins that can be used to buy things.

Market Capitalization numbers make it easy to compare the values of different cryptocurrencies. Even though precious stones and metals can’t change their values relative to each other, cryptocurrencies can. What was fifth on the list could move up or down depending on how the market is doing. In the cryptocurrency market, there may come a time when more diamonds will be needed to equal the value of gold. If you know how to read the market capitalization value, you’ll know how valuable your gold (for example, Ethereum) and diamonds (for example, Bitcoin) are in the world of cryptocurrencies.

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The market cap value also helps you figure out how big a currency is and how much it could grow. As or if the market capitalization value goes up, the market cap value shows that more money is being put into that cryptocurrency. The aggressive and volatile nature of this value in cryptocurrencies is a key part of figuring out the value of one cryptocurrency compared to others.

When trading cryptocurrencies, the percent change in price, preferably in a good direction, can be more important than the market cap. There have been many times when the value of a cryptocurrency went up by more than 50% in a short amount of time (a few days), but the market cap stayed in the millions, not the billions. You can be sure that the investor who got a 50% return on that investment (ROI) was very happy with the outcome. So don’t let cryptos with a lower market cap value than Bitcoin lead you away from good trading opportunities. There are lots of crypto fish in the sea, from the bottom to the top, that have a good chance of creating positive trading opportunities. The most important thing you need to do when trading small-cap cryptocurrencies is to pay attention to them. There is a potential for volatility in cryptos that you can use to your advantage as an investor.

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