In this guide, we will be explaining what crypto market capitalization means and how market cap affects crypto price. Etc. Market cap is a metric used to understand the current market value and price of an asset.
Experts use the term market cap when evaluating the crypto industry’s growth. It is also a criterion used to rank cryptocurrency networks as well.
Understanding a coin’s market capitalization and how market cap affects crypto price will enable you to trace its development and prominence in the market.
The market cap also assists you in making effective investment decisions in the crypto sector.
Are you still wondering what market cap is and how market cap affects crypto price? Kindly read through this article for a guide.
What is Market Cap in Crypto?
Market cap or market capitalization in crypto is the total dollar value of a particular token multiplied by the total amount of currency that is currently in circulation.
A crypto market cap highlights an asset’s long-term stability. Generally, cryptocurrency with a large market capitalization indicates more stability, while smaller caps are more open to market sentiment.
How Market Cap Affects Crypto Price
Generally, the higher the market cap or market capitalization of a cryptocurrency, the more dominant it is considered to be in the market this is how market cap affects crypto price.
For this singular reason, market capitalization is often regarded as the most important indicator for ranking cryptocurrencies.
Investors make use of the market cap to tell a complete story and also compare value across cryptocurrencies. As a key statistic, it can be used to indicate the growth potential of a cryptocurrency and whether it is safe to buy compared to others.
How Market Cap Increases
There are two through market capitalization market cap can be increased.
- If the stock’s market value increases, the market capitalization will also increase; the reason is that the market capitalization is nothing but the value of the total outstanding shares of a company.
- Companies can also increase market capitalization by introducing new shares. For instance, if a company increases its shares from 10 million to 20 million, with each having a market value of RS.150, then the market cap of the Company would be Rs.300 crore.
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How High a Market Cap Can Go?
Here is a quick breakdown of how the market cap is segmented across companies of different sizes:
Type of Stock
Market Capitalization Range
- Mega cap
More than $200 billion
- Large cap
$10 billion to $200 billion
$2 billion to $10 billion
- Small cap
$300 million to $2 billion
- Micro cap
$50 million to $300 million
How to Calculate Crypto Market Cap
Crypto market cap = supply of crypto assets in circulation x value of an individual unit.
Let’s calculate the market cap of Litecoin; let’s say one Litecoin costs $201.5. and there are 66,643,162 Litecoins currently in circulation.
Therefore, the market capitalization of Litecoin would be the cost of one Litecoin multiplied by the total number of Litecoin in circulation.
Multiplying these numbers, we will get the total figure of Litecoin market cap to be: $13,428,862,695.
This particular number is equal to the total market value of the crypto network. When the market capitalization of one crypto goes higher, we can understand that the network is on the path to success.
Best Market Cap Calculator
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Factors that affect the Market Capitalization of a Company?
The following factors affect the market cap of a company:
- The Demand and Supply of a particular stock
- Performance of competitors
- Economic environment and also other factors such as macroeconomics and geopolitics.
- The Company-specific news
- The Company’s fundamental parameters
While crypto market capitalization is indeed an important figure, it is also not enough to make the right investment decisions.
This data should be combined with other insights and metrics to analyze where the crypto market is going.
To know the market cap of any popular cryptocurrency, you can use websites like CoinMarketCap, which provide enough data about any coin or token.
Let’s have your view and opinion on market cap and how market cap affects crypto price in the comment section below.
Watch the video below to know how market cap affects crypto price:
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