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What Is Crypto Market Cap? A complete Guide

4 Mins read

Cryptocurrencies are all the rage right now, and for a good reason- they offer a new and innovative way to invest your money. But what happens when you want to take that investment to the next level? That’s where the crypto market cap comes in; it’s an important tool for measuring different cryptocurrencies’ value and overall market trends.

What is the crypto market cap, and how does it work?

“The crypto market cap is the total value of all cryptocurrencies in circulation. It’s calculated by multiplying the total number of coins by the current price of each coin.” This gives you a snapshot of the overall market and allows you to compare the value of different cryptocurrencies.

Crypto Market Cap - what is it
Crypto Market Cap – what is it / unsplash.com / Behnam Norouzi

The crypto market cap can be used to measure the size of the market and assess overall market trends. It’s also valuable for identifying which coins are undervalued or overvalued.

How to calculate Crypto Market Cap?

To calculate the crypto market cap, you need to know two things- the total number of coins in circulation and the current price of each coin.

The total number of coins can be found on the blockchain or in the coin’s whitepaper. Each coin’s current price is available on various exchanges and websites.

“Once you have this information, you can calculate the crypto market cap by multiplying the total number of coins by the current price of each coin.”

For example, let’s say there is 10 million Bitcoin in circulation, and each Bitcoin is worth $1,000. Bitcoin’s market cap would be 10 million x $1,000, or $10 billion.

Why is the crypto market cap important for investors?

The crypto market cap is important for investors for a few reasons.

First, it gives them an idea of how much the entire market is worth. This can help them better assess whether or not they want to invest in the space.

Second, it can help them gauge the risk/reward profile of the market. If the market cap is high, it means that there is more potential upside but also more downside risk.

CryptoMarketCap
CryptoMarketCap / unsplash.com / Kanchanara

Lastly, it can help them track the overall health of the market. If the market cap is consistently increasing, it generally means that the market is doing well.

In short, the crypto market cap is an important metric for investors to track because it gives them a good overview of the market’s size, potential upside/downside, and overall health.

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The biggest cryptocurrencies in terms of market cap?

Market caps shift and fluctuate with the price and distribution supply of crypto coins and tokens, but the relative ranking is relatively stable. The top 10 Crypto-denominated market capitalization in the US dollar in mid-July 2021 is as follows:

  • Bitcoin: Total Market cap of BTC is $578.1 billion 
  • Ethereum: Total Market cap of ETH is $218.3 billion. 
  • Tether: Total Market cap of USDT is $62.0 billion. 
  • Binance Coin: Total Market cap of BNB is $47.1 billion. 
  • Cardano: Total Market cap of ADA is $36.1 billion. 
  • USD Coin: Total Market cap of USDC is $26.8 billion. 
  • Ripple: Total Market cap of XRP is $25.2 billion. 
  • Dogecoin: Total Market cap of DOGE is $23.6 billion. 
  • HEX: Total Market cap of HEX is $22.9 billion. 
  • Polkadot: Total Market cap of DOT is $11.3 billion. 

The rankings may change as the prices and distribution of each crypto coin or token change. Still, the top 10 are typically Bitcoin, Ethereum, Tether, Binance Coin, Cardano, USD Coin, Ripple, Dogecoin, HEX, and Polkadot. 

Factors that can affect the crypto market cap

There are a number of factors that can directly or indirectly affect cryptocurrency market capitalization. Some of them are as follows:

  • Regulation: The cryptocurrency industry is still in its early stages and is not yet regulated in most jurisdictions. When regulations are introduced or tightened, it can directly impact the market cap. For example, China’s crackdown on ICOs in September 2017 led to a sharp decline in the total market cap.
  • Media coverage: The media plays a big role in creating awareness about cryptocurrencies and can also influence their prices. Favorable media coverage can lead to a rise in prices, while negative coverage can have the opposite effect.
  • Innovation: Cryptocurrencies are still a new and emerging technology. Any innovative development, such as the launch of a new cryptocurrency or a new application built on top of an existing blockchain, can positively impact prices and the market cap.
  • Adoption: The more people use or adopt a cryptocurrency, its price will be higher. This is because there is a limited supply of most cryptocurrencies, so an increase in demand leads to a rise in prices.
  • Sentiment: Investor sentiment is another important factor that can affect prices. When investors are optimistic about the future of a particular cryptocurrency, it can lead to a rise in prices and an increase in market cap. However, when sentiment turns negative, it can have the opposite effect.
  • Geopolitical events: Global events can also affect the prices of cryptocurrencies. “For example, the UK’s vote to leave the European Union in June 2016 led to a sharp decline in the pound sterling value, which directly impacted the prices of Bitcoin and other cryptocurrencies.”
  • Market manipulation: There have been several instances of market manipulation in the cryptocurrency markets. For example, in January 2018, the US Securities and Exchange Commission (SEC) charged a man with running a Ponzi scheme that defrauded investors of more than $30 million. Market manipulation can lead to artificial inflation or deflation of prices, which can impact the market cap.

So, these are some of the factors that can affect cryptocurrency market capitalization.

Conclusion

In conclusion, the crypto market cap is a good way to measure the relative size of a cryptocurrency. It takes into account the total supply of coins and the current market price. Market capitalization can be used to compare different cryptocurrencies and track the industry’s growth as a whole. However, it is important to remember that the market cap is not a perfect measure and can be affected by factors such as media coverage, innovation, and adoption. So, before investing in any cryptocurrency, it is always advisable to do your own research.

At Signals Blue, we perfectly understand the concept of crypto market cap and thanks to our crypto signals you will not have to go deeper into this knowledge.

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