Top on this week’s cryptocurrency newsfeed was “Cryptocurrency retakes 2T dollars market cap”. After doing some further reading, I saw that the 2T was an approximation of $2,013,576,749,569. The global market cap for cryptocurrency has witnessed a 2.15% increase over the last couple of days. What do these numbers mean for the blockchain industry, and most importantly, what does it mean for you?
To start with, let’s take a look at what a “market cap” means. Market cap is short for market capitalization and it can be defined as the total value of all the coins that have been mined for a cryptocurrency e.g Bitcoin, Ethereum, etc. This value is calculated by multiplying the number of coins in circulation by the current market price of a single coin. In simple terms, market cap = total number of coins in circulation * current market price of a single coin at a given time.
Market cap as a term is not one that is original to the blockchain industry. Instead, it is used in the conventional financial industry to refer to the total dollar value of all the shares of a company’s stock. In the case of cryptocurrencies, it refers to the value of all the coins that have been mined. To understand market capitalization better, let us consider the circulating supply market cap and the fully diluted supply market cap. For Bitcoin, for example, these two metrics are 18.5 and 21 million respectively. The Circulating Supply Market Cap is the value of Bitcoin that has been mined, while the Fully Diluted Market Cap is the value of Bitcoin that will eventually be mined. Observers use either of the two metrics to express the market cap of a cryptocurrency. From the aforementioned, it can be deduced that the 2T dollars figure which was referenced at the beginning of the article is the combined market cap value for all cryptocurrencies currently available.
What then is the importance of the market cap? Price is one way to deduce the value of a cryptocurrency, when you open your crypto app, the first thing you look for is the price of the cryptocurrency you are “hodling” or trading. The question then is, does the price of a cryptocurrency tell you all you need to know? That’s where the market cap comes in as it tells a complete story that goes beyond just the value of the cryptocurrency and from the market cap of a cryptocurrency, you can make informed investment decisions.
As the combined market capitalization of cryptocurrency has reached $2T, it means cryptocurrencies will be less volatile. By and by, this results in the improved stability of cryptocurrency investments. If you are already invested in cryptocurrency, it is time for you to sit back and check how to grow your investments. If you are a novice, then it is time for you to dive in (with the wisdom of course). And, that’s why we are here to hold your hands on this exciting new adventure. Diagon has created two newsletters Diagonal and A Newbie’s Guide to Understanding Cryptocurrency (#ANGTUC) to crypto education in everyday language. You can sign up on Diagon here to start receiving our newsletters straight to your email.
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Crypto Term of the Week:
Market cap.
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