It is the total dollar value of all the shares of the cryptocurrencies that have been mined. It is calculated by multiplying the total number of coins that have already been mined, by the price of one coin at any given time.
The term market capitalisation, or market cap, refers to a number that measures the relative size of a cryptocurrency. As we mentioned above, it is calculated by multiplying the current market price of a particular currency or by the total number of coins in circulation. (Market limit = Current price x Bid turnover).
For example, if each cryptocurrency is traded at $10.00 and 50.000.000 coins are in circulation, the market capitalisation for them would be $500.000.000. Thus, for example, Cardano has a higher price than Litecoin, although the former is worth close to $1, while Litecoin is close to $160 because there are fewer Litecoins in circulation. While the market cap may provide some information about the size and performance of a company or a cryptocurrency, it is important to note that it is not the same as cash inflows, thus, it does not represent how much money is in the market.
This is a common misconception because the calculation of the market “ceiling” depends directly on the price, but in reality, a relatively small price fluctuation can significantly affect the market ceiling.
Why is it important?
The price of a crypto currency is just a way to measure its value. When it comes to investing in cryptos, investors use market capitalisation to compare value across other cryptos as well. Market cap indicates the growth potential of cryptos and if it is a good idea to buy.
For more information on the current prices of crypto currencies and their market capitalisation, visit CoinMarketCap.