Crypto market capitalization refers to the total value of all cryptocurrencies. In contrast to stock market capitalization, crypto market capitalization is calculated by multiplying the price of a cryptocurrency by the number of coins in circulation.
For stock market investors, market capitalization is an essential factor. This isn’t the case for crypto investors.
Stock market capitalization — the value of a company’s total shares of stock — can help investors build and maintain an investment portfolio. Still, crypto investors do not have to abide by those rules.
One way to think about market cap is as a rough gauge for how stable an asset is likely to be. A cryptocurrency with a much larger market cap is expected to be a more stable investment than one with a smaller market cap. Conversely, digital currencies with smaller market caps are more susceptible to the whims of the market — and can see huge gains or dramatic losses in their wake.
What can you do with Market Cap?
The market cap of a cryptocurrency enables you to compare its overall worth to other currencies, helping you to make better investment decisions.
Cryptocurrencies are divided into three groups based on their market cap:
● The market capitalization of large-cap cryptocurrencies exceeds $10 billion. Investors consider them to be lower-risk investments because they have a proven track record of growth and typically have better liquidity. This means they can sustain an enormous volume of individuals cashing out without significantly damaging the price.
● Mid-cap cryptocurrencies have market values ranging from $1 billion to $10 billion, and they are often thought to have tremendous untapped upside potential but at the same time, more risk.
● Small-cap cryptocurrencies have a market capitalization of less than $1 billion and are the most vulnerable to market sentiment fluctuations.
In comparing the total value of cryptocurrencies, the market cap is an important metric. Nevertheless, market trends, the stability of a cryptocurrency, and your financial situation all need to be considered when weighing investment risks.
(written Catherine S Thomas)
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