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What is Market Capitalization?

 

How does market capitalization affect your your decisions when trading Cryptocurrencies? What does that value really mean?

  • Should you only invest in cryptos with a large market capitalization value?

  • The one big trick to investing in small cap crypto

 

This is one definition that translates into the same meaning across  all instruments of finance. What is the whole kit and kaboodle worth? The sum of all parts is equal to the market capitalization. The amount of market capitalization in regards to cryptocurrencies helps you interpret that particular cryptocurrency’s value in relation to other cryptocurrencies. I like to look at it this way just as there are a variety of precious stones and precious metals of different values in relationship to each other.  There are also a variety of cryptocurrencies that have a range of value in relationship to each other.

A diamond is considered to be one of the most valuable gems on Earth. Gold is considered to be one of the most precious metals on Earth. The amount of gold necessary to equal the value of a quality 1 carat diamond can help you visualize how market capitalization helps evaluate the worth of a cryptocurrency. In most cases the actual weight of gold necessary to equal the value of a quality diamond will always be more than the weight of the diamond.

The cryptocurrency with the greatest market capitalization is Bitcoin.

Bitcoins market capitalization value is approximately $110 billion US dollars at the time of this writing. Ethereum Follows with a market capitalization value of approximately $29.5 billion. And just like the weight of gold will be more than the weight of a diamond of equal value. More Ethereum coins are required to equal the value of 1 Bitcoin.

In order to calculate the market capitalization value. You must multiply the the amount of coins in the circulating supply by the current market price. The circulating supply is the best factor to use to realize the value of market capitalization. The reason being that the  circulating supply of coins are the only coins that can truly affect the value of the currency. Since they are the only coins available to purchase goods and services.

Market Capitalization values help you quickly compare the value of one cryptocurrency to another. Albeit unlike precious stones and metals, cryptocurrencies have the potential to rearrange their values compared to each other. What may have been 5th on the list can move up or down depending on market conditions. There may be a time when more diamonds may be needed to equal the value of gold in the cryptocurrency marketplace. Being able to interpret the market capitalization value will let you know how valuable your gold (eg. Ethereum) and diamonds (eg. Bitcoin) are in the cryptocurrency arena.

The market cap value also assists you in determining the size of a currency and its potential to grow. As or if the market capitalization value grows, the market cap value reveals an indication of more money being invested in that particular cryptocurrency. The aggressive and volatile nature of this value in cryptocurrencies is critical in determining a particular cryptocurrency’s value alongside other cryptocurrencies.

When trading cryptocurrencies the percent of change in the price preferably in a positive direction can outweigh the market cap value. There are many instances where a crypto has gained more than 50% in value in a short period of time(a few days) while maintaining a market cap value in the millions not billions. Be assured the investor that received a 50% return on that investment (ROI) was extremely satisfied with the result. So don’t be led astray from viable trading opportunities with cryptos that have a lower market cap value than Bitcoin. There are plenty of crypto fish in the sea rising from the bottom to the top that bring a high potential for profitable trades. The biggest trick to trading small cap cryptocurrencies is to pay attention to them. There’s a healthy amount of volatility in those issues for you as an investor to take advantage of.

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