For anyone interested in dipping their toes into the cryptocurrency market, it’s important to know what you’re getting into. Do as much research as you can and know the risks of investing before you potentially lose, or even gain, a lot of money.
You should start by educating yourself on the various terminologies you’ll come across while looking to buy cryptocurrency. One such term is ‘Cryptocurrency Market Capitalization‘ or ‘cryptocurrency market cap.’
What is a Cryptocurrency Market Cap?
To put it as simply as possible, A cryptocurrency market cap refers to the total value of all the coins currently on the market. As more coins are mined, or the price of each currency rises, so does the cryptocurrency market cap. Market capitalization isn’t a new concept.
On the traditional stock market, the market cap of a particular stock refers to the total dollar value of all the shares of that stock.
How is Cryptocurrency Market Cap Calculated?
Suppose you’d like to calculate the total market cap of any particular coin yourself. In that case, the formula is rather straightforward. You can calculate a cryptocurrency market cap by multiplying the total number of coins mined so far with the price of a single currency.
Suppose you know the price of one token and the market cap. In that case, you can reverse engineer the same formula, dividing the market cap by the cost of each token to calculate the number of coins mined so far.
What Does the Cryptocurrency Market Cap Tell Us?
Why does the cryptocurrency market cap matter? Why is it a piece of data that investors care to look at in the first place? In most cases, the market cap of a cryptocurrency can measure how volatile or reliable the investment is. Usually, the higher the cryptocurrency market cap is, the more stable an asset it is.
But do keep in mind that no investment is completely sound. Take Bitcoin, for example. Even with the highest market cap of any cryptocurrency, Bitcoin has still seen periods of intense volatility.
Circulating Supply Vs. Fully Diluted Supply
When talking about a cryptocurrency market cap, investors usually refer to one of two things. ‘Circulating supply’ refers to the total value of the coins that have been mined to date. ‘Fully Diluted Supply’ refers to the total potential value of all the coins that will ever be mined. Keep in mind that some cryptocurrencies limit the number of coins that can be mined, while others don’t.
The Current State of The Cryptocurrency Market
At the time of writing this article, the cryptocurrency market has finally turned green again, after a slump that lasted several weeks. Skeptics were already claiming that major cryptocurrencies were dead in the water. Still, the market is starting to gradually heal again. On June 1st, 2022, the cryptocurrency market experienced a significant boost, thanks to the Terra Luna cryptocurrency.
Early on May 12th, Bitcoin shot down to just $26,800. Now, less than a month later, the price of Bitcoin has risen by 18%, a significant net gain for anyone bullish enough to buy the slump. Bitcoin’s market cap currently closes in at just over a whopping $600 billion, making it perhaps the single most reliable coin to invest in. Bitcoin hasn’t made a complete return to form quite just yet.
Before the slump, the cryptocurrency was at a high of $47,000, and investors are still divided on when we might see Bitcoin return to such a high. On a more positive note for Bitcoin, those tempted to buy the slump still have the opportunity to do so before Bitcoin continues rising past the current level.
Terra Luna is now being touted as the savior of cryptocurrency by some people. The cryptocurrency currently has a market cap of $1.7 Billion, putting it in the Top cryptocurrencies based on market capitalization.
At the time of writing this, Ethereum is down by 0.34% this week but should see a bump in value sooner rather than later. The current market cap for Ethereum is around $234 billion. Currently, there are over 120 million tokens of Ethereum circulating in the market.
Tether is actually up right now, but only by a small margin. The cryptocurrency holds a market cap of nearly $72.5 billion. Arguably the most impressive rise this week has been Cardano. Cardano rose 18.68% this past week, reporting a market cap of $20.3 billion.
As of right now, there are 33 billion Cardano tokens in circulation. On May 31st, 2022 alone, Cardano rose 27% in a single day. In doing so, Cardano shot past Ripple to claim its spot as the 6th biggest cryptocurrency based on market capitalization.
As of the past 24 hours, the infamous Dogecoin is up 2%, though it’s hard to say if this is despite or as a result of the ongoing public feud between the founder of Dogecoin, and tech entrepreneur turned cryptocurrency twitter influencer, Elon Musk.
Recently, Dogecoin founder Jackson Palmer didn’t claim that Elon Musk is ‘really good at pretending he knows.’ In retaliation, Musk claimed his 12-year-old could write better code than Palmer. Some people within the cryptocurrency industry are claiming this recent internet feud is manufactured to drive the value of Dogecoin.
What To Know Before You Invest
Cryptocurrency Market Cap is just one useful metric you should know when you invest in cryptocurrency, but it’s not the only one. You should also keep your finger on the pulse of current market events. Emerging technologies can bolster the value of certain cryptocurrencies while tightening government policies can restrain others.
Finally, consider your own financial situation. Can you afford to invest large sums of capital into a single cryptocurrency all at once? Or is it more within your budget to invest small amounts over a long period? These are questions you should answer before you invest in cryptocurrency.