Can Crypto Market Cap increase?
This article discusses the market capitalization terminology, how it is calculated and the significance of this measurement technique. It also explains in detail how the market capitalization can increase or decrease and hence directly affects the investor’s decision in considering a particular crypto coin.
Before delving into the market capitalization for Cryptocurrencies, let’s understand what the term is actually and how it is significant in crypto trading and crypto mining.
Significance of market capitalization
The term market capitalization originated in the stock market. However, it works slightly differently for cryptocurrencies than in stock markets. Within the crypto-verse, the market capitalization of a crypto coin is used to describe an indicator that measures the overall value of a particular cryptocurrency in the global crypto marketplace.
It is extremely essential for crypto traders to know the value a specific crypto has in the market for mainly for the following reasons –
(i) Market capitalization resonates the dominance of a particular cryptocurrency in the global market
(ii) Market capitalization gives an idea of the popularity of a particular cryptocurrency among the global pool of crypto traders and miners
(iii) Market capitalization gives the buyer more details before making trading decisions
(iv) Market capitalization gives investors understand vital information about the cryptocurrency that helps them to determine whether to consider it or not
How is the market capitalization of a crypto coin measured?
Market capitalization is the total valuation of a crypto coin within the global marketplace, affected by trading times and demands within the ecosystem heavily. It is calculated by a simple formula which is to multiply the ongoing market price of a particular crypto token or coin with the total number of its coins in the circulation pool. The formula is demonstrated below:
Market Capitalization = Current/Ongoing Price x Circulation Supply
For example, if one unit of a specific cryptocurrency is being traded in the market at $10.00, and the circulation supply equals 50,000,000 crypto tokens or coins, then the market capitalization for this cryptocurrency would be around $500,000,000.
Although the market cap offers certain insights about the size, value and performance of a crypto trading company or, likewise, a cryptocurrency project, it is incredibly vital to note that the market cap is not always the same as money inflow.
Therefore, the market cap of any crypto token does not actually represent how much money is in circulation in the market ecosystem. It is a common misconception about market capitalization that the calculation of market cap depends on price, but in fact, even a minimal variation in its cost can affect the market cap considerably. Hence, one must remember that market caps are not the exact determinants of success or failure an investor would expect by trading in that coin; rather, it is only an indicator of the popularity of the coin and can help the investor generally to procure information about the coin’s potential before buying it.
Can Cryptocurrency Market Capitalization increase?
Market capitalization is often referred to simply as ‘market cap’ and is seen as the most vital indicator of the relevance and popularity of a cryptocurrency in the global market. Not only does it gauge the highest trading value of a cryptocurrency, but the market cap also outlines the popularity of a crypto coin over a long period.
Large market caps are generally considered as a safe crypto that investors can bank on. These are usually cryptocurrencies with a market capitalization of over $10 billion or more. Investing in crypto coins with a high market capitalization is regarded as a conservative strategy by analysts as these coins tend to be less volatile than other cryptocurrencies in the ecosystem. However, these coins are still enormously volatile in comparison to traditional assets like shares or stocks.
Cryptocurrencies are always rising and falling, and there is a high chance every coin appreciates and depreciates over time. The value of the cryptocurrencies market had topped $2 trillion for the first time in April 2021. Ether hit its highest ever at $2,151.25, recording an increase of 180%. Bitcoin, the largest digital currency which accounts for over 50% of the entire crypto-verse, was the biggest driver of the $2 trillion market cap. This tells us that the cryptocurrency market is constantly making and breaking records, and the market cap can increase all the time.