Crypto Market Capitalization

Trading Made Easy 2022-07-22 16:23:53

A Market Cap for a cryptocurrency is calculated by multiplying coins in circulation and coins' worth.


Crypto Market Capitalization



Traders and investors in all kinds of markets need to develop a balanced portfolio to maximize their chances of achieving their financial objectives. What this portfolio will look like will depend on their risk appetite, goals, time preferences, and the nature of the market they come to invest in.


The cryptocurrency market is no exception, and a big part of understanding portfolio planning and implementation involves grasping the significance of market capitalization and how it impacts the valuation of any particular asset, currency, or holding.



What is Market Capitalization?


Market capitalization refers to the value a company commands in terms of stocks and shares. To arrive at this value, an evaluator will need to take the total number of shares in the company and multiply this figure by the price of an individual share. A company with 1,000 shares, each valued at $10 on the market, will be said to have a market capitalization of $10,000.


Arriving at this figure makes it easy for investors to quickly and accurately estimate a company's size in relation to another. One can apply the principle of market capitalization to other investment areas such as cryptocurrencies, where the focus is on the capitalization of individual crypto assets. Crypto market capitalization is derived by multiplying the value of a currency by the number of its coins that are currently in circulation.


This metric is helpful for investors seeking efficient ways of determining the composition of their portfolios. It offers a way to gauge the future potential of prospective investments by evaluating how much the market is willing to pay to own them, whether this will be in terms of stocks or crypto coins.


How Market Capitalization Influences Investor Behaviour


When speaking of companies in the U.S. and international financial markets in so far as portfolio management is concerned, investors can group companies in three general brackets as follows:

  • Large Market Capitalization: Companies falling into this category will generally have an excellent reputation in the market for the quality of their goods and services, and they will have a track record of steady growth over time. They will be established industry leaders, offering investors a low-risk option with the potential for small but reliable gains.
  • Medium Market Capitalization: Companies here are those considered to be relatively well-established in markets expected to see rapid growth in the future. They are expected to expand their market share over time as they streamline and sharpen their competitiveness, making them attractive options for investors seeking high returns in exchange for accepting relatively higher risks.
  • Small Market Capitalization: These are typically young organizations in emerging industries or limited niches. Companies in this bracket will be the most aggressive and, therefore, the riskiest investments out of the three categories highlighted here. These companies are therefore attractive to investors with higher risk appetites. However, savvy investors might be fortunate enough to realize excellent returns on them should such companies grow to become medium or large capitalization entities down the line.



Crypto Market Capitalization


As mentioned earlier, individual cryptocurrencies can be equated to companies in that their capitalization can be a valuable indicator of their suitability as constituents in an investor's portfolio. The reality of crypto is that it is such a new industry that the distinction of market capitalization categories has not had time to solidify yet.


The volatility of crypto values further compounds the classification problem since investment risk levels help characterize large, medium, or small market cap holdings. Even so, investors can still make use of market capitalization to help formulate their crypto investment portfolio. There are countless coins on the market today, and market capitalization remains relevant when it comes to crypto in its capacity as a method of assessing or predicting a currency's potential for growth or its scope.


Bitcoin Market Capitalization


The number of coins each cryptocurrency has in circulation is always known because blockchain technology makes the number very easily tracked. Investors can keep track of the mining progress (how coins are added onto the chain for traders to access) in real-time.


Bitcoin, for example, has approximately 18.8 million coins currently in circulation, with their value fluctuating around the $45,000 mark. You can thus calculate the market capitalization of Bitcoin to be $752 Billion (45,000 x 18,800,000). This represents the largest market cap of any cryptocurrency currently available. 


Ethereum follows in a significantly distant second place with a capitalization of almost $351 Billion (117 million coins valued at $3000 per coin). The value of Bitcoin makes its market cap much higher than Ethereum's despite having fewer coins in circulation due to its coin value.


While Bitcoin and Ethereum might be considered the significant market capitalization assets of the crypto world, this metric does not translate directly to lowered risk as it does in the world of stocks and shares. Bitcoin remains a highly volatile asset, with prices ranging widely on a day-to-day basis.


BingX Market Capitalization


The market capitalization of a trading platform such as BingX can be estimated by assessing the volume of transactions conducted. The market capitalization on this site over 24 hours regularly averages approximately $3 Billion, a substantial activity rate. This makes BingX rank among the large-to-medium market capitalization category, making it a safe and reliable platform for crypto trading and investment.


Final Thoughts


Weighted caps make up the most popular application of market capitalization when it comes to crypto portfolio management. Platforms such as BingX make it possible to assemble a balanced portfolio of safer currencies such as Bitcoin and Ethereum in addition to other riskier altcoins that offer immense growth potential. 


With $100, an investor might, for instance, weigh their portfolio by investing $60 in Bitcoin, $20 in Ethereum, and $20 in the altcoins of their choice. They will thus have created a balanced portfolio of safe and higher risk, which should be the goal of all investors aiming to invest in the crypto market profitably.


The choice of which crypto to invest in makes a great deal of impact on the chances of financial success in the industry, especially for inexperienced traders, which is why investors should put plenty of thought into the portfolio decision process.


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