Value Settled– This is a measure of how much economic value is being settled on the blockchain. Let’s look at an example of two hypothetical coins:Ī token called Tapioca token has 400,000 coins in circulation and each coin is worth $1, its market cap is $400,000Īnother token called Rice Pudding token has 100,000 coins in circulation and each coin is worth 2$, its market cap is $200,000Įven though the price of Rice Pudding token is higher than Tapioca token, Tapioca token’s overall value is double that of Rice Pudding Token.Ĥ of the top 5 are Ethereum Based Projects Image via newsletter.banklesshq Price alone cannot be used to determine the value of an asset, novice investors may look at Bitcoin with a price tag of 50k and think it is way too expensive then look at an asset like Cardano which they can buy for $1.50 and think Cardano is a better deal as it is much cheaper, but it doesn’t quite work like that as that is comparing apples to oranges. It is a key statistic as it can indicate the growth potential of a cryptocurrency and whether it is a good buy compared to others.
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Investors use market cap to be able to see the full picture and compare value across cryptocurrencies. The price of a token is just one way to measure value. One of the Ways to Find a Tokens Market Cap is by Looking at Why is Market Cap Important?
Conversely, this is also why Bitcoin is the safest cryptocurrency as anything that can go up 1000X can just as easily go down in the same way. This is also why smaller altcoins can sometimes pump 1000X in a short period of time as it only takes a few buying whales or a bunch of retail investors to jump in at once to pump an asset, while the larger cryptocurrencies like Bitcoin will likely never see a 1000x gain in a short time frame as that would take tens of billions of dollars worth of capital to flow into it. This is because it takes a significantly more amount of money to move the asset drastically. Market cap is used to gauge the size of a crypto asset and is important to note that the higher the market cap, the lower the volatility and the more stable the asset is likely to be. It is calculated by multiplying the number of coins in circulation by the current market price of a single coin. For crypto, market capitalization is the total value of all the coins that have been minted. Market capitalization for crypto is different to stocks and is calculated in a different way.
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That title has always been held by Bitcoin which has had the highest market capitalization over any other cryptocurrency by a large margin, though Ethereum has been gaining on Bitcoin since its inception back in 2015 and has long held its position as the second-largest coin in terms of market cap.Īs Ethereum continues to upgrade and more utility is being built on the network, ETH is enjoying faster rates of adoption and developer activity which leads many to believe that it is only a matter of time before Ethereum takes the crown from Bitcoin as the top dog in the crypto space. There has been a fierce battle raging for years between Bitcoin enthusiasts and Ethereum enthusiasts on which coin will ultimately be the largest coin by market cap.
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