Cryptocurrency market capitalization is a simple, straightforward way of finding out how big a digital currency is — and it can help you make smarter investment decisions.
Cryptocurrency market capitalization is a simple, straightforward way of finding out how big a digital currency is — and it can help you make smarter investment decisions. In fact, CoinMarketCap first popularized looking at a coin’s market cap for ranking cryptoassets way back when.
Let's imagine that an altcoin is currently worth $100, and it has a circulating supply of 25 million. Multiplying the two tells us what the crypto market cap is — in this case, $2.5 billion.
What Is the Total Market Cap?
Coins with a larger total supply are usually priced much less expensively. Aside from the value of their blockchain technology, scarcity tends to be a driving factor in a cryptocurrency's value. Case in point, BTC has an all-time high of $20,000, while Ripple's record is just $3.84.
Circulating supply — which looks at the number of coins available to the public — isn't the only method for calculating a crypto market cap. Alternatives include calculating the total supply (factoring in assets that might be locked up or reserved).
Another is maximum supply. Here, market capitalization is calculated by multiplying an altcoin's price by the maximum number of coins that could ever exist. (This can be difficult to do. Not only would a higher circulating supply likely affect the price of cryptocurrencies, but some altcoins have no upper limit.)
Is Crypto Market Cap an Important Metric?
There's a lot of debate about how much weight should be placed on the size of the cryptocurrency market. Some critics claim that it's an unwelcome legacy of the stock market — leading to misguided investment decisions and contributing to substantial levels of fear and greed.
However, crypto market caps can also give us a fact-based look at how altcoins are performing — a much-needed source of objectivity away from social media.