How is Market Cap calculated?
The market cap of a cryptocurrency is determined by the current price multiplied by the circulating supply:
Market Cap = Price (X times) Circulating Supply
Coinmarketcap is currently the most popular website to keep track of market cap of cryptocurrencies and to get an overview of how popular each currency is. It also offers the crypto worldâs most popular index for all relevant financial metrics for cryptocurrencies.
On Coinmarketcap all prices are calculated by the volume-weighted average of all the prices from different exchanges. Bear in mind that it is important to monitor the circulating supply of a cryptocurrency – not the total supply. After all, it is only the circulating supply that is really available on the market right now.
The market cap of a cryptocurrency more or less reflects the popularity of a coin over a longer term.
Is market cap the best way to measure the popularity of a cryptocurrency?
Even though the market cap of a project is still seen as the most important indicator of relevancy, the concept behind this is often subject to criticism. The reason is that the market cap of a cryptocurrency more or less reflects the popularity of a coin over a longer term.Â
Large-cap cryptocurrencies are generally considered to be safe crypto investments. These are companies with a market cap of more than $10 billion. Investing in coins with large market capitalisation is usually a conservative strategy. These coins are likely to be less volatile than other cryptocurrencies but still more volatile than traditional assets like stocks.
Mid-cap cryptos are more volatile but also have a lot more growth potential than large-cap cryptocurrencies.
Small-cap cryptocurrencies are often extremely volatile and considered a highly risky investment, albeit sometimes with a lot of potential (short-term) growth. However, be aware that they may also crash, literally from one minute to the next.Â
