Market Cap it is the abbreviation of "Market Capitalization", a term that points to the value of a negotiated asset. Cryptocurrencies also have market limits, a measure of the current value and the size of a particular cryptocurrency. If a coin or token has a relatively high market limit, it is naturally larger than other altcoins in the market. As an example, bitcoin is the largest cryptocurrency at the moment, based on its market capitalization.
The calculation of market capitalization is relatively simple and is determined by multiplying the spot or current trading price with the total current offer. Continuing with the example of bitcoins, a bitcoin is currently worth $ 6.612. Rounding to simplify this example, it can be said that there are 18 million bitcoins in circulation.
Furthermore, bitcoin has a market dominance of around 40%. This means that the value of bitcoin includes about 40% of the entire cryptocurrency market.
Market capitalization: market price
The market price of an altcoin refers to its price based on current market rates, seen on various exchanges. Simplified, the price of a digital currency is what buyers and sellers agree in an open market. To complicate things slightly is that different trades pegging different prices on bitcoins. Several trading pairs will also have an impact on the price, as well as the simple question of where the snapshot of the country is taken.
It is patently true that bitcoin prices are not consistent between exchanges and countries at any given time. This happens because of the differences in supply and demand, the fundamental dynamics at stake when a good is traded, including digital resources.
The logical and usual path to anchoring the price of an asset is to use an aggregate price. This is simply the average of all prices, collected in different stock exchanges around the world at that time.
Market capitalization: current offer
The circulating offer of any currency refers to the number of coins in the global circulation. The offer of circulation is different from the total offer, in particular with cryptocurrency. At the time of writing, there are 17,106,787 bitcoins in circulation. The final maximum bitcoin "mint" will be 21 million, based on its original configuration and data mining protocols.
The new bitcoin will be generated while the mining continues, until the issuance of the last coin for a total of 21 million. At that time, the total supply of bitcoins will be equivalent to the circulating offer. Lot of altcoins come pre-extract, which means that the full token offer is available for the system at the beginning.
In most new cases, this is the model employed and these altcoins arrive with a total supply equivalent to their circulating offer. There is an understandable trend for traders to look at an altcoin and assign a value based solely on its current price.
High prices in cents attract those who hope to see it increase in value in the short term. There is, however, another critical factor to consider when evaluating a digital currency, and this is its rolling offer. For example, Ripple is priced at $ 0.485, a fraction of Litecoin's current price of around $ 80.70. if a trader sees the prices of both currencies, he could run upward on Ripple, while Litecoin seems much more "settled" and unlikely to earn in bites of dollars.
In reality, however, Litecoin's prospects are far more favorable. This is because Litecoin has an outstanding availability of 57 million coins, much less than the 39 billion Ripple! To equate Ripple's capitalization, Litecoin will have to quadruple its value. But the true value of Litecoin for an investor can present itself differently when the circulating offer is taken into account and has a correct weight in the valuation of the coins. It is important to consider market capitalization and aspects such as the circulation of supply – as opposed to price alone – in order to legitimately evaluate a cryptocurrency.
Total market and individual market capitalization
Two parameters are important when looking at the market capitalization in the cryptocurrency market. The first would be the market capitalization of each cryptocurrency. This metric is for single digital capital letters and, as the cryptosphere matures, sites like CoinMarketCap are just a click away and detail all current token cap noteworthy.
Altcoins are generally classified according to their market capitalization, as they are an information tool with which to analyze investments. The market capitalization of a currency is essential when evaluating a particular currency or when comparing altcoin.
Users who wish to have a general view of the general market will examine the second metric of market capitalization of the sector. Here the total market capitalization of the cryptocurrency industry is measured.
The total capitalization indicates the value of the entire cryptocurrency market. With thousands of cryptocurrency tokens now afloat, the total market capitalization is that of all existing altcoins. The total capitalization of the cryptosphere currently stands at $ 267.802 million.
Importance and use of the market cap
Using the market capitalization of a currency to determine the value of investment is blurred and not as simple as many demonstrate. Financial theory generally predicts that the larger an altcoin, the slower its subsequent growth rate will be. This is based on an analysis of the blue legacy chip and not always appropriate in the digital coin world. Similarly to the theories pointed out by penny cap investors, a recently coined altcoin should find it much easier to triple or more in price than a bitcoin market leader.
This must be exchanged against the equally real prospect of a new currency that does not undergo absorption and the fall in prices shortly after release. So, while bitcoin has the time and a huge global favor on its part, can not hope for a window of news that dramatically skips its price. On the other hand, a new cryptographic token may be able to quickly gain value, but it has its novelty and market competition to deal with, and therefore there are not even guarantees.
The lowest coins in the market are also subject to abuse by traders and especially whales (large investors). It is easy for some to manipulate coins with the bottom of the capsule since they are still in their infancy. There is no history or many case studies that allow the respectability of currencies among global investors.
A freak of regulators around the world, this type of market manipulation is symptomatic of the problems lawmakers try to tackle, as these practices are also obscure in legacy investments. Logically it follows that such attempts to bitcoins would be useless, as the project has a much higher value and volume of trade. Trying to manipulate the bitcoin market would entail large sums of money and is, to all intents and purposes, impossible – or certainly not effective or useful.
Display of Market Cap correctly
As shown above, market capitalization can not be the only instrument used by a diligent investor, but can not be excluded from any serious analysis. Market capitalization opens the door to a complete and better analysis of a digital currency. Displaying a metric or other isolated indicator can not give the trader the overall picture.
Market capitalization is typically an indication of the size or value of an altcoin. The investment in cryptocurrency is still an extremely volatile space and investing in any digital currency by observing a single metric is a recipe for making mistakes. The current price, the market capitalization, the current offer and the future offer prospects must be viewed together before a cryptocurrency can be evaluated.