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Author: Admin | 2025-04-27
Understanding market capitalization (or “crypto market cap”) is essential for crypto investors trying to make well-informed investment decisions. This article will explore what cryptocurrency market cap is, and how it can be used to indicate the value of cryptoassets.What is a cryptocurrency market cap?Traditionally, market cap indicates the total value of shares of a company’s stock. The crypto industry has adopted market capitalization, or “crypto market cap,” as a similar metric to indicate the overall market value of any given cryptocurrency.How to calculate a cryptocurrency market capCrypto market cap is calculated by multiplying the price of a coin by the total number of coins in circulation.For example, in the screenshot below, the price of Bitcoin (BTC) is $57,876.81. The maximum supply of BTC is 21 million coins, and 93.9% of the supply is currently in circulation (approximately 19.73 million BTC coins).If you multiply the current price of BTC ($57,876.81) by the number of tokens in circulation (19.73 million), you’ll reach a market cap of $1.141 trillion.Past performance is not an indication of future resultsSource: eToroWhy is the crypto market cap important to investors? It is important for investors to understand what is meant by crypto market cap, as it allows them to see past the price of a cryptoasset to gain a better, overall insight into its value. Market cap allows for comparison between coins, enabling investors to compare the relative size and value of one cryptocurrency with another. Data from a wide range of cryptocurrencies can further indicate the total crypto market cap, as a measure of how the asset class is performing overall.This can offer investors wider market insight and can help them formulate decisions about whether now is the right time to invest.Investors should also be aware of how market cap can impact the price of an individual cryptoasset by influencing its perceived value and investor sentiment. A higher market cap can indicate increased stability and demand, signifying investor confidence and thus, driving the price upwards.Maximum vs circulating supplyIt is important that crypto investors do not just take market cap metrics at face value. There are several differences between crypto and traditional financial markets that should always be considered. In traditional financial markets, “free float” metrics can differentiate between shares that are available to be publicly traded, and those that are held in “lock up,” perhaps by company founders, directors, or executives. This essentially differentiates between the total (or “maximum”) supply and the circulating supply of shares.Similarly, in the crypto sector, a coin’s maximum supply can differ from a coin’s circulating supply, but the difference between these two metrics is not always made abundantly clear.Maximum supply refers to the maximum number of cryptocurrency coins or tokens that
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