Understanding Cryptocurrency Market Capitalization

Understanding Cryptocurrency Market Capitalization

If you are interested in cryptocurrencies, make sure you understand what cryptocurrency market capitalizations are. The market capitalization may be the best way to determine how much money you will earn from a cryptocurrency. Understanding it also helps you in avoiding cryptocurrencies that have less moneymaking potential.

What Exactly is Crypto Market Cap?

The market capitalization refers to the value of the crypto units currently available on the market. It strongly indicates demand as it shows the amount of invested money in a certain crypto. To calculate the market cap, multiply a crypto’s circulating supply (the number of units for sale of a crypto) by the price of the coin (the cost of a crypto unit).

Predicting Returns

Generally, a lower market capitalization leads to higher potential returns on crypto equity. Thus, you should invest only in coins if there is a lower market cap. But because you may not be comfortable with this, you may want to check high market cap coins such as Bitcoin, Dash and Ethereum for a safer investment. A lot of people invested in Bitcoin due to its market cap which is higher than Ethereum’s.

What Else is there to Know?

Although the market capitalization is used for measuring a crypto’s value, there are a lot of factors that can impact the value of a crypto. These include forks, press coverage, government regulation, technology, rumors and politics.

Financial experts and big corporations consider Ethereum as a better crypto than Bitcoin due to the flexibility of its technology and ecosystem. In Ethereum, it is possible to build smart contracts and markets. But, the market cap and coin price of Bitcoin is currently bigger. This may have to do with the familiarity of this crypto.

The Game Changers

There are many things that can ruin the crypto market. The coin price for Bitcoin dropped after news stories disclosed the plan of the Chinese government to shut down a lot of crypto exchangers in the country. A factor which would impact the market cap and coin price of altcoins is the announcement of big corporations of its plan to accept Ethereum payments.  The same is true when governments announce a national cryptocurrency or its plan to collect Bitcoin and Ethereum prices.

It is imperative the crypto investors research the news about altcoins regularly. Being aware of what’s going on the market can help them avoid undesirable surprises. Also, they need to examine the market cap of cryptocurrencies and determine the possible returns they can expect.