Bitcoin what does market cap mean
Nov 09, · Bitcoin Dominance: A Brief Definition. Calculating BTC dominance is straightforward. Let's imagine that the total market cap of all cryptocurrencies currently stands at $ billion. If Bitcoin's market cap represented $60 billion of this, Bitcoin's dominance would stand at 60%. See? It couldn't be easier. BTC Dominance Over the Years. Bitcoin’s market cap, therefore, is roughly $94 billion. Traditionally, stocks and bonds have been analyzed via financial metrics and ratios. Measures like price-to-earnings ratio, earnings per share, the current ratio, earnings growth, and so on are used to examine stocks. Oct 03, · Market capitalization refers to how much a company is worth as determined by the stock market. It is defined as the total market value of all .
Bitcoin what does market cap meanMarket Capitalization Definition
Because of their low market cap, these cryptos are susceptible to the whims of the market. To put it simply, you may see your investment in them go down to a negligible amount in an instant. So, the question arises, why should you invest in them in the first place? Well, because they have the potential to truly explode in value and give you huge returns on your investment, much more than what large-cap or mid-cap cryptos can give you. One of your main challenges as an investor is to thoroughly research everything and…..
Image Credit: The Asset. How exactly should you invest your hard-earned money in cryptocurrencies? So, we have three classes of cryptos: large-cap, mid-cap, and small-cap. These classes may not experience growth at the same time. Meaning, your mid-cap cryptos may grow at a time when your large-cap cryptos are depreciating. Hence, it makes sense to have a portfolio which is diversified and has a good mix of all the three classes. NOTE: We are not financial advisors.
Please do your own research before investing. Image Credit: YouTube. The term market capitalization originally comes from the stock market. To understand how differently market cap works for stocks and crypto, you need to have a basic understanding of how stocks work. Owning stock in a company will give you a share of its ownership. Ownership broadly means two things:. The total value of all the shares is the market cap of the company.
Now, in the case of cryptocurrencies, a large portion of the tokens is held by the company behind the project and by whales who just eat up the tokens and keep them dormant in their wallets. NOTE: Whales are rich investors who use their financial clout to buy huge amounts of a particular cryptocurrency.
Remember, most of these stocks pay dividends. So, the stocks that the owners will have will earn them dividends, which in turn is going to dilute the stocks owned by the other shareholders. However, this is not the case with cryptocurrencies. When a whale hoards up tokens in their wallets, it just lies there. How many stories have you heard about folks having hundreds of bitcoins in their pen drive and then completely forgetting about it? If a big portion of the supply is locked up, then this seriously affects the liquidity of cryptocurrency and the coins get spent more often.
Suppose there is a hypothetical crypto called A Coin which has a total supply of million coins. Now, imagine that some whales have bought and stored away 50 million A coins. So, now we only have 50 million coins available for trading.
Imagine that A Coin really goes off and people start trading more and more, they will only have 50 million coins to trade with instead of million As such those 50 million coins are going to be spent more often. Bitcoin is the perfect example of this. According to this article , 9. Overspending leads to high token velocity. Token velocity increases when people are selling off their tokens at a faster rate.
High token velocity means low network value. Since these tokens have low liquidation, the velocity invariable increases. So, more the trading volume aka more that coin is traded more the velocity.
Consequently, less the network value, more the velocity. What all this basically means is that market cap may not be the best metric to judge the value of a cryptocurrency. Like we have stated above, there is a critical difference between the market cap for stocks and the market cap for cryptos. In that case, the market cap is a pretty accurate metric.
Without all these metrics, market cap is not really the best method to judge the actual value of a cryptocurrency. Market capitalization is a well-known metric for traditional securities, but has unique implications in crypto. Market capitalization is a measure of the value of a security.
It usually consists of multiplying the amount of outstanding stock shares by the current stock price. There are around Traditionally, stocks and bonds have been analyzed via financial metrics and ratios. Measures like price-to-earnings ratio, earnings per share, the current ratio, earnings growth, and so on are used to examine stocks.
You can learn a lot about crypto just by checking market caps. First things first: Bitcoin is still the big dog in town. There are still relatively few valuable cryptocurrencies. A high or low market cap can reveal a coin that is resistant to volatility, or vulnerable. But holders of tokens with small market caps are at risk of being crushed by larger traders.
If several whales conspire to sell at the same time, the price of a token can crash to nothing instantly. This would be much tougher with Bitcoin and Ethereum, which have large market caps and are not easily manipulated. A market cap is merely a number reflecting the amount of circulating coins and their price. As we mentioned, a large token holder can hugely influence the price of a coin.
As well, some tokens have taken flack for developers holding large amounts of coins. If development teams hold large amounts of coins, they can retain control over the direction of the token, while presenting the appearance of a coin with a healthy market cap. RIpple, before its recent bull run, was attacked for this.