What is Total Market Capitalization?

What is Total Market Capitalization?

Definition Total Market Capitalization

For a digital currency like Bitcoin, the total market capitalization is the total value of all mined currencies. It is calculated by multiplying the number of coins in circulation by the current market price of a single coin.

The total market capitalization is the total dollar value of all shares of a company or, in the case of Bitcoin currency or other digital currency, of all mined currencies. In Cryptocurrencies, the total market capitalization is calculated by multiplying the total number of coins minted by the price of a single currency at a given time.

Total market capitalization is a way of roughly measuring the likely stability of an asset. (It should be noted that even Bitcoin, with the largest total market capitalization in Cryptocurrencies, still experiences volatility).

But just as a larger ship can safely navigate rough waters, a digital currency with a much larger total market capitalization is more likely to be a more stable investment than one with a total capitalization of market much smaller.

Likewise, Cryptocurrencies with lower total capitalization of market they are more susceptible to market swings and can experience large gains or substantial losses.

Note: You may see references to full market capitalization with “pending offer” or full market capitalization with “fully diluted offer”. With Bitcoin, these two numbers are either the 18,5 million that have been extracted (“rolling supply”) or you can use the 21 million that will eventually be extracted (“fully diluted supply”).

Depending on the methodology, some observers measure the total market capitalization using the current pending offering, while others use the fully diluted offering.

Why is Full Market Capitalization Important?

Price is just one way to measure the value of a moeda digital. Investors use full market capitalization to tell a fuller story and compare values ​​across Cryptocurrencies. As a key statistic, it can indicate the growth potential of a digital currency and whether it is safe to buy it compared to others.

To demonstrate this, let's compare the total capitalization of market of two fictitious cryptocurrencies.

  • If digital currency A has 400.000 coins in circulation and each coin is worth 1 USD, the total market capitalization is 400.000 USD.
  • If digital currency B has 100.000 coins in circulation and each coin is worth 2 USD, the total market capitalization is 200.000 USD.

Although the individual price of coin B is higher than that of coin A, the total value of digital coin A is twice the value of digital coin B.

Still, it is also important to keep in mind that the total market capitalization of many Cryptocurrencies can fluctuate substantially due to their volatility.

What Can You Do With Full Market Capitalization?

Full market capitalization allows you to compare the total value of one digital currency against others, so you can make more informed investment decisions. Cryptocurrencies are classified by their total market capitalization into three categories:

Large cap cryptocurrencies, including Bitcoin and Ethereum, have a total market capitalization of over USD 10 billion. Investors consider them to be less risky investments because they have demonstrated a history of growth and are often more liquid, meaning they can support more people making redemptions without the price being substantially impacted.

Midsize cryptos have market capitalizations of between $1 billion and $10 billion and are generally considered to have more untapped upside potential as well as greater risk.

Small cap Cryptocurrencies have a total market capitalization of less than $1 billion and are more likely to experience sizeable swings based on market sentiment.

Total market capitalization is a useful metric for comparing the total value of Cryptocurrencies, but market trends, the stability of an encrypted currency, and its status consultant must be considered when weighing the risks of any investment.

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