In this article, you will learn about cryptocurrency market cap and how to calculate it. Also, you will learn about the importance of market capitalization for cryptocurrencies and the factors that influence market cap. Apart from that, this article will also categorize cryptocurrencies on the basis of market cap.

Hence, to learn more about cryptocurrency market capitalization, read on to the end of the article.

What Is Cryptocurrency Market Cap? 

The crypto market is extremely volatile, and the market cycles heavily affects their prices. However, the good part is that the transaction process happens on a decentralized platform. This lets investors and buyers perform transactions securely and anonymously.

The fact is that most investors are over-enthusiastic about cryptocurrencies because of their returns (especially Bitcoin). However, they hardly give importance to learning about the market capitalization of Bitcoin and other crypto options. To learn more about cryptocurrencies like Bitcoin, visit Coinfomania.

Whether you are a crypto enthusiast or an investor, it is crucial to understand the cryptocurrency market cap and how it works.

In simple terms, the market cap is the overall size of cryptocurrency and its value in the market. Why is it necessary in the first place?

This is because by understanding cryptocurrency market capitalization, you can get insights into the future potential and performance of the currency you want to invest in.

Since many businesses and individual investors are getting used to crypto transactions and trading, understanding the market cap will help you learn crypto investment options better.

Cryptocurrency Market Cap Formula 

Basically, the cryptocurrency market cap is the total value of all the currencies in circulation (in USD):

Market Cap = Total Number of Coins (of any crypto) x Price of a Single Coin

Generally, market cap acts as a rough gauge for an asset’s stability (in this case, cryptocurrency). Despite that, the crypto market is still volatile. In fact, Bitcoin faces price volatility even though it has the greatest market cap.

However, a bigger ship has a better chance of getting past harsh weather. Similarly, a crypto with a bigger market cap is a more stable investment.

Importance of Cryptocurrency Market Cap 

Before you start investing in crypto, you must learn the several areas that the cryptocurrency market cap covers. Here are a few:

1. Cryptocurrency Rankings 

As an investor, you will always try to find a cryptocurrency that is trending. You can find out more about that crypto by looking at crypto listings on crypto exchanges. Here, you will get all the details about price, volume, and market cap.

2. Value Assessment 

For most investors, a cryptocurrency with a higher market cap is a stable investment. This is because it has more liquidity. Also, it comes with a higher number of users. Similarly, a cryptocurrency with a lower market cap is more volatile and carries investment risks.

3. Understanding Market Sentiment 

If you see changes in market capitalization for a cryptocurrency, it is also a reflection of market sentiment. For example, if the market cap for a particular cryptocurrency is growing, it means there is a positive impact on investor confidence.

Basically, if investors have growing confidence in a cryptocurrency, it will increase the market value of the crypto.

4. Making Investment Decisions 

Many professional investors consider market caps when they make their investment decisions. However, investors who are new to the market look for large cap Cryptocurrency investment options (or any other asset). In some cases, experienced investors can also show interest in small-cap crypto assets.

Factors that Influence Cryptocurrency Market Cap 

The following are the major factors that influence cryptocurrency market cap:

1. Demand and Supply 

When there is a scarcity of a particular crypto, it escalates prices due to a higher demand. However, higher prices result in bigger market caps.

2. Technological Developments 

With more innovations, coins become credible. As people have more access, it becomes more attractive. Technological upgrade shows that there are signs of improvement both in the system and in transaction mechanisms.

3. Legal Regulations 

With changes in regulatory compliance and government policies, market dynamics change. Hence, when market conditions change, there is a bigger impact on the market cap.

4. Market Sentiment 

Market sentiment and investor behavior are major factors that determine the market cap of cryptocurrencies. In fact, the overall perception of investors will be a major factor in their decision-making. Hence, on the basis of these decisions, there will be an impact on market capitalization.

Cryptocurrency Categories Based on Market Cap 

Now you know the importance of cryptocurrency market cap and the factors that influence it, it is time to categorize crypto assets based on market cap:

1. Large Cap 

Some crypto options have a high market cap of over $10 billion. Two such examples are Bitcoin (BTC: with $1.9 Trillion) and Ethereum (ETH: with $315.61 Billion). Hence, these coins are reliable options for most investors.

2. Mid Cap 

These cryptocurrencies have a market cap between $1 billion and $10 billion. Hence, investing in these coins will come with a balance of risks and rewards. Despite that, many investors find them attractive investments.

3. Small Cap 

Small-cap cryptocurrencies have a market cap of less than $1 billion. Hence, they are quite volatile when it comes to price fluctuations. However, they have a very high upside potential. But the catch is there are significant risks (even to the extent of failure).

Wrapping Up 

If you want to invest in crypto, you must understand its potential, size, and stability. By understanding a cryptocurrency market cap, you can venture into its market condition. This will give you better insights into your investment decisions. Also, before investing in crypto, one needs to be patient with their research.

Do you have more suggestions on how to watch the crypto market cap? Please share your ideas and opinions in the comments section below.