With the availability of numerous cryptocurrencies today, a lot of factors have to be considered to know which one you should invest in. One of these is market capitalisation, which is typically used as a reference when it comes to the popularity of digital assets. This gives you an idea of how well-known and widely used a cryptocurrency is based on its ranking on the list.
If you want to know what market capitalisation is and how it works, learn more about it right here at CryptoShimbun!
What is market capitalisation?
In cryptocurrency, market capitalisation is the total value of the digital asset that has been mined. This is calculated by multiplying the price of the cryptocurrency and the number of coins currently in circulation.
Crypto investors tend to look at the market capitalization of a token to its stability in the market. The bigger the market capitalisation is the higher the chance for a coin to be more stable in terms of investment. Oftentimes, altcoins with a smaller market capitalisation tend to see large gains and losses.
Additionally, market capitalization is also an indicator of a cryptocurrency’s popularity and relevance among all the available altcoins in the market. While this greatly influences an investor’s decision in investing and trading digital assets, there are still other things that need to be considered, including a cryptocurrency’s features.
Cryptocurrencies can fall under one of the three categories—small-cap, mid-cap and large-cap to describe the standing of each digital asset. Learn about their differences in each category below:
As the name suggests, the small-cap category includes cryptocurrencies that have a market cap of less than $1 billion. Due to the low market cap, altcoins in this category are typically susceptible to dramatic losses. If this is the case with a digital asset, you might see your investment go down.
Mid-cap cryptocurrencies have a higher market cap than small-cap altcoins which range from $1 billion to $10 billion. While this category is in the middle, it still carries risks of tremendous gains and losses due to market fluctuations and the asset is still in the process of increasing the market or utility since it has more growth potential.
Large-cap cryptocurrencies are considered safe investments since they’re less volatile and have higher liquidity compared to other altcoins. When a digital asset is included in this category, your investment won’t undergo major growth since it already has a large-cap, which means a lot of people have invested in cryptocurrency.
Additionally, large-cap cryptocurrencies typically have a market cap of more than $10 billion.
Importance of market cap
The crypto community’s opinion on the market cap is polarized because some people claim that it leads to misguided investment decisions. On the other hand, some investors say that it gives people fact-based information on how cryptocurrencies are currently performing.
Compared to traditional assets like money or stocks, cryptocurrencies are not controlled by one authority alone. Instead, they’re controlled by an entire community of crypto users. The value of each digital asset is determined by its market price. With this, its potential and relevance are indicated.
Tracking of crypto market cap
Among all the sites that provide an accurate crypto market cap, CoinMarketCap is currently the most trusted and popular platform investors and crypto enthusiasts visit. This site keeps track of the updated market cap of each cryptocurrency and provides an overview of their performance so users know what their standing market is.
CoinMarketCap is currently the most visited website for timely price-tracking of digital assets. Founded in May 2013 by Brandon Chez, it quickly became the most trusted source by crypto users and major news websites for market updates. CoinMarketCap’s crypto prices are calculated based on the volume-weighted average of the different prices from various crypto exchanges.
Top cryptocurrencies by market cap
With the number of available cryptocurrencies nowadays, there’s competition in the crypto sphere regarding the performance of each coin and where they should be in the list of top cryptocurrencies.
To help you get to know where each type fall, see the list of top cryptocurrencies based on market cap:
Bitcoin is currently the top cryptocurrency by market capitalisation. It was created in January 2009 by the mysterious and pseudonymous Satoshi Nakamoto. Up to this day, the true identity of the founders is still unknown.
Bitcoin is a decentralized digital asset that allows users to trade and send BTC through peer-to-peer transactions. All transactions for Bitcoin are recorded in a blockchain which is a public distributed ledger that can be accessed by everyone.
Additionally, Bitcoin was created with the goal of faster transactions and lower fees to solve the common problem experienced by users when using a traditional banking system. Bitcoin uses peer-to-peer (P2P) technology to facilitate instant payments without any central authority.
Ethereum is the next top cryptocurrency based on market capitalisation. Ethereum is a blockchain in which its coin called Ether (ETH) powers the network. Like Bitcoin’s blockchain, Ethereum is also a decentralized public ledger where the verification and recording of transactions happen.
Apart from verifying and recording, Ethereum is also used to create and publish decentralized applications called ‘dApps’. These applications are accessible to anyone and can be used without help from a third party. Founded in 2015, Ethereum was created by Russian-Canadian programmer Vitalik Buterin.
Now, tons of altcoins operate as ERC-20 tokens on top of the Ethereum blockchain including Chainlink (LINK), Tether (USDT), Wrapped Bitcoin (WBTC), OmiseGO (OMG) and more.
For the third cryptocurrency when it comes to market capitalisation, Cardano currently follows Ethereum. Founded in 2015, Cardano is a decentralized proof-of-stake blockchain platform created by Charles Hoskinson. This digital asset was designed to solve existing problems in other cryptocurrencies which include inflexibility and lack of scalability.
Cardano has a native token called ADA which was derived from the 19th-century mathematician and computer programmer, Ada Lovelace.
Binance Coin or BNB is Binance exchange’s native token founded in July 2017 by Binance’s creators Changpeng Zhao and Yi He. Like the previously mentioned cryptocurrencies, BNB is used to trade and pay for products and services. Currently, Binance Coin is fourth when it comes to market capitalisation.