Cryptocurrency market capitalization, say what?
If you talk about price and return of cryptocurrencies, then you can’t avoid discussing the concept of market capitalization sooner or later. What this concept entails, how you calculate it and what you can do with it, you can read right here.
The market capitalization, also known as market cap, provides insight into the size of a particular crypto coin. The larger the crypto coin is, the more important. You calculate the market capitalization and it can vary at any time. In the simple calculation you have to keep an eye on a number of things.
How do you calculate market cap?
You can easily calculate market cap by multiplying the market price of the crypto coin with the circulating offer. This calculation is simple, but you have to keep an eye on a number of aspects for both quantities. We explain this briefly.
Not everyone is equally convinced of the usefulness of market capitalization, as the gentleman will explain in this video.
A crypto coin market price
The market price can depend on various factors. For example, the price per stock exchange or exchange may be different, the countervalue may also differ. For example, the value of Bitcoin (BTC) compared to Euro is different from the value compared to Dollar or another crypto coin, such as Ethereum (ETH). In our current price overview we always use the market price that is based on the relation to Dollar.
A crypto coin circulating offer
To take the right ratio it is important to only look at the amount of coins that are currently available. The total quantity is of less importance, for example when there is still a part to be mined or there is still a part in so-called ‘lock-up’.
For example, we see at Bitcoin that the total number of coins is 21 million. Of this, as you can see on the CMC page for Bitcoin (BTC), there is currently 17.51 million circulating/available supply. Also market capitalization is calculated for you. As soon as the entire stock of 21 million Bitcoin (BTC) is mined, the available supply will be equal to the total supply.
To get a good picture of the circumstances of a crypto coin, it is therefore important to know how many coins have been mined beforehand. After all, a market capitalization of a currency says less when 90% is already mined. Even if the currency is fully premined, the interpretation of market capitalization of a particular crypto coin is different. We illustrate this in the second part with an example.
2 types of market cap
There are two ways to assess market capitalization. You can look at the market cap per crypto coin or the market cap of the entire crypto market. We briefly explain both variants.
Market cap of the entire crypto market
By looking at the market cap of the entire market at once, it is easy to draw conclusions about the development of the market. When the circulating/available supply of coins as a whole increases faster than the price increases, this is a sign that the prices are falling and the market as a whole is negative. Conversely, this also applies. When the total market price rises faster than the available quantity of coins, there is an increase in value.
Market cap per crypto coin
By calculating and tracking the market capitalization per crypto coin, we can follow the development of a certain currency and compare it with, for example, the market cap of the entire market or another crypto coin.