Market Capitalization is something that has traditionally only been applied as a measure of the total value of a publicly traded company. It is found by multiplying the number of shares outstanding by the price per share. It’s use as a measure of overall value is now being applied to bonds, commodities, and cryptocurrencies using the same formula.
By: Jack Spade | Apr 22, 2020 | Modified Apr 22, 2020
Cryptocurrency Market Capitalization is the circulating Supply of Coins * the Price Per Coin. Also referred to as Crypto Market Cap, it is the combined Market Cap of all cryptocurrencies.
Coin market cap, however, represents the combined market cap of a single coin. For example, Bitcoin’s Market Cap is ₿18,330,762 X $7200 = $132 billion, at the time of writing. This can also be referred to as the total value of bitcoin.
No. Circulating supply is all of the coins currently in circulation, that is, available to users. Coins may have a very high circulating supply but still have a low market cap. Ripple, for example, has a circulating supply of 44 billion XRP, but its market cap is only $8.4 billion, because its price per XRP is only $0.19.
Bitcoin has the biggest market cap at ~$132b ($320b at its peak), making it the same Market Cap as public companies like Visa, Johnson & Johnson, and IBM.
There are a number of Bitcoin alternatives, referred to as “altcoins”, that have developed massive market caps of their own. Here’s a look at the top five at the time of this writing:
Market cap is a primary measure of total value. When altcoins have a high market cap, they are usually seen as more reliable – based on the assumption that more people have invested in that cryptocurrency – and when they have a low market cap they are seen as speculative, new, and less reliable cryptocurrencies.
Altcoin market cap is an important measure against Bitcoin for industry adoption. If it is lower compared to Bitcoin, that means there is less attention and investment being paid to altcoins. Lower altcoin market cap also implies less activity on their respective platforms and applications. The inverse is also true.
As a rule of thumb, yes. But, once upon a time, Amazon was valued at less than $500m mcap when it first went public, and Apple was just over $100m mcap when it went public – so finding Small Market Cap (also referred to as smallcap) coins/companies can be a really good way to get in early on the next big thing. This leads a lot of speculation to happen in small caps, with most of them ending up not panning out, but then there are the long shots that become large caps or even mega caps like Amazon and Apple (Ethereum, Ripple).
Yes. Market caps can be manipulated by manipulating the price of the coin. This happens often in small cap coins that have low active trading volume there and low circulating supply, making it easy for someone to manipulate the price up or down with a few thousand dollars.
No. The formula is the same, but that is the commonality. Stock market capitalization reflects the equity value in the company, which means how much the ownership of it is worth. This has important implications for attracting business, credit, and also operations. Coin market caps do not reflect equity in the company, because they are coins, not shares, meaning they hold no legal attachment to the company, and so are more like currencies.