What is a market cap in crypto?
You might have heard this term refer to the stock market and wondered what it had to do with the cryptocurrency industry.
Market cap is short for market capitalization, and for the stock market, it usually represents the value of all existing shares of stock of a company. The crypto industry works a bit differently, and we’re about to find out how with this article.
We are going to talk about market capitalization in the crypto industry. What is it and how does it work? We’ll go over that and more.
What is a cryptocurrency market cap?
This is very similar in definition to that of the stock market. It represents the total value of a cryptocurrency.
Lets say, for example, that there is a coin named ValorExc. There are 2,000 pieces of it in existence and each is sold for N5. For you to get the market cap, you’ll have to equate the cost per coin multiplied by the total number of the cryptocurrency in circulation, i.e. N5 multiplied by 2000. The total value from the equation is the market cap for ValorExc.
Types of Market cap?
There are different types of market caps and each has its own pros and cons.
Small market cap: These cryptocurrencies have a market cap below $1 billion and are usually susceptible to price fluctuations due to market sentiment. Converting these cryptocurrencies to fiat currencies is sometimes a problem because few people are trading with them.
Mid-market cap: These types of cryptocurrencies have a market cap between $1 billion and $10 billion. They have a lot of growth potential but are usually high risk.
Large market cap: Cryptocurrencies with large market caps are usually the more significant and popular cryptocurrencies like Bitcoin and Ethereum. These categories are valued above $10 billion. They have higher volumes of trades and are the least likely to crash in the crypto market completely.
You can also use them to make Transfers and payments or remittances worldwide on ValorExchange. All you need is an account that you can get started with just an email and a phone number. It’s fast, secure and effortless because that’s how we work on ValorExchange.
In conclusion
Every cryptocurrency has a market cap, and although some might be small, there is still potential to grow exponentially as time marches. That is not to say buying them isn’t risky, whereas more established or larger coins are safer or more secure. Crypto market caps are valuable information you could use to make the right decisions in your crypto journey.
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