The crypto market is an open book with various investment opportunities. The possibilities of gaining profits are unlimited, but they go hand in hand with risk. Whether to come out of the market with a shield or on a shield sometimes requires demonstrating opposing qualities – patience and proper timing, restraint, courage or analytical skills, and trusting instinct.
How not to get lost in all of this?
This is a question you’ll have to answer for yourself, but understanding hard data will always be useful on the path to success. Enjoy the article from which you will learn what market capitalization is!
“Explain the market cap like I am five years old”
It’s simple. To begin, let’s remind ourselves what it means in centralized financial markets. The market cap is the total value of all traded shares. In crypto it is similar – the number of available coins in circulation multiplied by their price (usually expressed in US dollars).
If the circulating supply of cryptocurrency A is 1 million units, and its price is $2, then the circulating market cap will equal $2m.
If the circulating supply of cryptocurrency B is 500,000 units and its price is $4, then the circulating market cap will also equal $2m.
In this case, which one is worth more??
This is where the topic gets a little more complex. If we consider an investment in an asset, we need a set of data, not just capitalization, but some conclusions that can be drawn from it.
High market capitalizations indicate the popularity of cryptocurrency. The project is a tremendous success when it tops the rankings. This testifies to its numerous uses, the possibility of acquiring other goods, the speculative motive, or the function of storing value, which in practice resultantly translates into growth and maintenance of the price. Cryptocurrencies with the highest market capitalizations are, among others, Bitcoin (BTC), Ethereum (ETH), Tether (USDT), and USD Coin (USDC). As an interesting fact, bitcoin at its ATH peak had a market capitalization of $1.23 trillion. While this is difficult to imagine number, it can easily be exchanged for all of the American Buy all the sports leagues.
Smaller initiatives that offer a lower supply of their tokens, therefore market cap, are often emerging projects that build their value based on the token’s utility. Anything is possible in the digital asset market, so a minor project that drives the price up by multiplying it on exchanges can overtake large projects at some point in the future when the token’s popularity goes to the proverbial moon.
Here, a great example is the NFT tokens, whose collection could easily make millions or even billions of market caps with only a few in full supply. Did you know that the most expensive NFT was sold for the equivalent of $91.8 million? It means that if this collection would be only this one asset, then the supply would equal one, and the market cap would be $91.8 million.
Market cap breakdown by value
- Small-cap cryptocurrencies – have a market capitalization of less than $1 billion, and can be most affected by market fluctuations. All it takes is for one larger investor to drop a large number of coins into the field, then the price can change. They also offer a great chance to make money if you hit the right moment of the euphoria associated with a listing, for example.
- Medium-cap cryptocurrencies – $1-10 billion. They are characterized by high risk, but surviving the first year after listing increases the chances of maintaining their market position.
- Large-cap cryptocurrencies – these are leading cryptocurrencies, e.g., bitcoin, Ethereum, and Binance Coin with a market cap exceeding $10 billion. Investors were in the habit of treating them as a safe haven which means storing long-term value due to their deflationary character and high liquidity. Although the current crypto winter has shown that they are subject to considerable fluctuations, this does not change the fact that they are still massive capitalizations that could recover in the future.
Summarizing – where to get information about the market cap?
Coinpaprika tracks market caps from over 350 exchanges listing over 45k assets and 40k trading pairs. Thanks to live-tracking, you are sure to get the most current information. Our API provides a set of indicators you can implement on an exchange, on-ramp platform, website, or as widget. Check out our plans at coinpaprika.com/api and choose the most tailored offer for your needs!