Market cap is a common term in the cryptocurrency world. The market cap is an important condition to understand the world of the crypto market. At first, you might think that price is just a solid way to measure the value of a digital currency, but we need to know that’s not true and understand why market value should be used as a token value. Due to market volatility, investors should do the necessary research before making an investment decision. And one way to do that is to use a measure of market cap. Market cap is an important metric in investment decisions, and it gives an overview of digital currencies.
What is market capitalization?
An important criterion in determining the size of the digital currency market is the market cap or market value. To the same degree that market cap is considered in capital markets such as the stock market, this criterion is also considered in digital currency markets and blockchain network projects such as Bitcoin, Ethereum, and altcoins. This concept shows the current value and quantity of assets. Another important measure is the market cap or total market capitalization of the cryptocurrency industry. Using this number, you can find the total value of all projects in the cryptocurrency industry.
Calculating the market cap of a cryptocurrency project is relatively simple. Although many cryptocurrency enthusiasts compare the market caps of various cryptocurrencies against one another, it is important to constantly check the market cap of a digital currency to measure its performance and to see how it is progressing or regressing over time. Market cap is equal to the number of units of a stock or asset multiplied by the price per unit of the stock or asset.
For example, if the price of a Bitcoin unit is $10,000 and the number of Bitcoins in circulation is 17,000,000 million, the market cap of Bitcoin is equal to 10,000 times 17,000,000, which is equal to 170,000,000. 000,000,000 dollars in other words.
What does the market cap show?
In general, and in theory, the market cap is inversely related to investment risk, meaning that the higher the total market value of assets, the lower the risk for investors. In the stock market, company shares are divided into three categories: “low value”, “medium value” and “high value”. The same applies to digital currencies. Investing in Bitcoin is theoretically less risky than investing in an anonymous digital currency. On the other hand, the low total value of a stock or digital currency means that the asset requires a smaller amount of capital to increase its price by, say, 50% compared to an asset with a larger size in the market.
In general, it can be said that the lower the market cap of an asset, the higher the risk, but if it increases, it is usually a big profit.
2.Ability to manipulate the market
One aspect of total market cap is market manipulation. Markets without value are often subject to market manipulation. Non-profit activists will be able to manipulate the foreign exchange market by getting enough. According to a book written by “Edwin Lefebvre” published in 1923 at the beginning of the stock market, many people who were active in the market were able to make huge profits.
3. Analysis of the importance of technology in the market
You can find projects with similar applications and goals and technologies, and by adding their market capitalization and comparing it to the total market capitalization, you can measure the importance and contribution of a particular type of technology in this market. For example, in the stock market, you can calculate the value of all technology companies and understand the importance of this issue in the market.
In the digital currency market, for example, by accumulating the market cap of privacy-based digital currencies or Prius coins (such as Moreno, Dash, ZCash, etc.), the total amount of capital available in this area can be obtained. And it can be compared with the total capital available in the digital currency market comparison and get an overview of the position and importance of cryptocurrencies.
The importance of the market cap of the entire cryptocurrency market
The market cap of all cryptocurrencies is often used as a comparison to other sectors in the wider economy. For example, many analysts constantly compare the cryptocurrency market cap to the market cap of precious metals or other financial markets. But why do they make such a comparison? The main goal is to have a rough estimate of how the digital currency industry will develop in the coming years and decades. However, no one yet knows the best way to value cryptocurrencies and blockchain-based projects. This comparison is useful and gives a good idea, but it should not be blindly trusted.
Comparing different financial markets is a futile exercise. Don’t forget that different industries attract different customers. Cryptocurrencies do not automatically appeal to stock traders, precious metals investors, or traders and investors involved in other types of economic activity. Despite the increasing acceptance and expansion of digital currencies, they are still at the beginning of the road and have not yet flourished as they should.
Market cap is a measure of the current value of a coin or token, and a fully diluted market cap is also a measure of a coin’s value in the future. Given that the calculation of the fully diluted market cap depends on factors such as access and value of tokens, and these factors may be subject to significant fluctuations, this measure cannot be sufficiently relied upon. Generally, fully diluted market capitalization is a more appropriate measure for long-term investment. Always consider several indicators and factors before entering the cryptocurrency market and do not consider only one indicator. However, when entering the cryptocurrency market, the size of the market cap can give you peace of mind that the cryptocurrency will continue to perform for at least the next few years.