What is a Market cap (in crypto)?
2021 has been a massive year with opportunities for cryptos! But the future says: It will keep getting wilder. The crypto market is going through a correction, and investors are concerned about the evaluation of different factors.
In the middel of all the chaos, the term ‘market capitalization’ is constantly being mentioned. Everywhere you look, you’ll see critical and curious analysts writing about how Bitcoin or some other crypto has lost or gained market cap.
But, what does it mean?
So, what is this and how does it actually affect your crypto investment? Let’s find out!
Market capitalization refers to a metric that measures the economic size of a cryptocurrency. It is calculated by multiplying the current market price of a particular coin/ token with the total number of coins in circulation.
So: Market Cap = Current Price x Circulating Supply.
For example, if each unit of a cryptocurrency is being traded at $10, and the circulating supply is equal to 50 coins, the market capitalization for this cryptocurrency would be $500.
While the cap may offer some insights about the size and performance of a cryptocurrency project, it is important to note that it is not the same as the money inflow. So, it does not represent how much money there is in the market. This is a common misconception, because the calculation of the market cap is directly based on price. But, in fact, a relatively small variation in price may affect the cap significantly.
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