What is a market cap?

Market capitalisation, otherwise known as a market cap, is the total value of all mined coins in circulation. In order to calculate the market cap, you must multiply the number of crypto coins in circulation by the current market price of a single crypto coin at any given time.

Market cap can be described as an estimate of how stable that digital asset is likely to be. While some of the biggest crypto assets remain volatile, any cryptocurrency with a higher market cap will most probably offer a more stable investment as opposed to those cryptocurrencies with smaller market caps. With that being said, cryptocurrencies that have smaller market caps are at the mercy of the market and are prone to massive gains and dramatic losses in a short space of time.

Market cap is either referred to as circulating supply market cap or fully diluted supply market cap. The circulating supply indicates the coins that have been mined while the fully diluted supply indicates the coins that will eventually be mined. In terms of calculating market cap, some use the currently circulating supply while others use the fully diluted supply.

Why is market cap important?

While price is one way that you can measure the value of a cryptocurrency, many investors use the market cap to provide a more holistic view, especially when comparing value across different cryptocurrencies. With that being said, investors must always consider the volatile nature of cryptocurrencies that may cause dramatic swings in those market caps.

What can you do with a market cap?

Essentially, a market cap gives investors the ability to make detailed comparisons regarding the value of different cryptocurrencies. With this information, investors can make more informed investment decisions. The market cap of cryptocurrencies can be classified across three categories:

Large-cap cryptocurrencies

Large-cap cryptocurrencies include the biggest cryptocurrencies in circulation, like Bitcoin and Ethereum. This category has a market cap of over $10 billion and investors consider it a low-risk investment due to its excellent growth track record and typically higher liquidity. All of this means that large-cap cryptocurrencies have the ability to endure a greater number of investors cashing out without drastically altering the price.

Mid-cap cryptocurrencies

This category usually includes cryptocurrencies with market caps that range from $1 billion up to $10 billion. Investors consider these cryptocurrencies due to their untapped potential, although that comes with higher risks.

Small-cap cryptocurrencies

These cryptocurrencies have a market cap of under $1 billion and are prone to volatile swings based on market sentiment.

Overview of Total Market Cap currently

While investors use market trends, the stability of a cryptocurrency, and their financial situation as factors when considering the risks of investing. Referring to the market cap is exceptionally useful when comparing the total value of cryptocurrencies. At the time of writing, the total crypto market cap is sitting at $1.74 trillion, a rise of 0.25% from the previous 24 hours.

Top 3 market caps for 2021

The top 3 market caps for 2021 are currently Bitcoin, Ethereum, and Tether.

Bitcoin’s market cap is currently sitting at over $743 billion, down approximately 1.23% from the last week. Its unit price is hovering around the $40k mark at the time of writing. Ethereum is firmly in second place with a market cap of over $328 billion, up approximately 3.41% from the last week. Its unit price is fairly stable at over $2,800 at the time of writing. Tether’s market cap is sitting at just over $61 billion, pipping Binance Coin and Cardano to third place and fractionally down 0.05% from the last week.

Final Thoughts

For those people looking to invest in cryptocurrencies, it is wise to consider the top 3 large-cap cryptocurrencies due to their higher liquidity and fantastic track record in terms of growth and stability. Make sure to use established platforms like Wisly to track and analyse your investments, and to maximise your performance. Good Luck!