ZoneBitcoin EditorialLa market capitalization of a crypto is what we call Market Cap in English. Let's not waste time and say right away what the crypto Market Cap is for: It is an indicator that measures the market value of a cryptocurrency. In French, we speak of market capitalization or market capitalization.
This is the essential definition to know. We therefore observe the market capitalization when we want to know the preponderance and popularity of a given cryptocurrency.
This explains why there are many sites like CoinMarketCap for example which group cryptos in order of magnitude according to their market capitalization.
Although it is very important to consider the MarketCap of a crypto, you should know that it is not the ultimate indicator to take into account either. We must also observe other measures before making an investment, for example.
As a general rule, the higher the market cap of a crypto, the more dominant it is in the market. This is typically the case with bitcoin, which has, unsurprisingly, the largest market cap.
How is market capitalization calculated?
Like any good indicator, there is an equation that governs its calculation. To calculate, we multiply the price of a cryptocurrency by the supply of tokens in circulation.
Market capitalization = Price X Circulating supply
The market capitalization of a crypto directly shows the popularity of a crypto, over a long term horizon. We can see directly in the ranking which ultimately are the most notorious cryptos.
Is it enough to only consider the market cap of a crypto?
We would try to invest directly in the top 10 then the top 100 cryptocurrencies according to their market cap. That said, it's too easy.
In fact, understand that large capitalization cryptos are considered to be investments without too much risk. Investing in this type of crypto is a good father type strategy. For what? Well, these are well-established cryptos, as a rule, which are less volatile.
Those with an average market cap have greater growth potential than those with very large capitations. In fact, we can hope to make better returns in the long term.
As for small-cap cryptos, the risk is greater. The volatility is extreme and while the growth potential is huge, remember that it can melt away like snow in a matter of minutes.
Again, with cryptos, always do your own research before investing. It is also important to observe other indicators. For example, we must also look at the trading volume of the different exchange platforms.
Beyond popularity, you will also see the activity of the crypto in question.
- Read our article on FDV (Fully Diluted Valuation)
- How estimate the value of a crypto?
- Know how to make a crypto fundamental analysis
No article is financial advice. Always do your own research. Investing involves risks.
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