You’ve probably seen this term pop up in cryptocurrency, but what does market cap actually mean? In this post, we’ll explain the market cap and give some examples of its use. We’ll also debunk some myths about it that you may have heard.
Market Cap Range
First, let’s start with the basics. Market capitalization, or market cap, is simply a way to measure the value of a company by multiplying the current share price by the number of shares outstanding. For example, if Apple Inc. (AAPL) has 16.262B shares outstanding and each share is worth $160, the company’s market cap would be $2.49T USD.
This figure is important because it gives you an easy way to compare different companies. For example, if company A has a market cap of $ 100 million and company B has a market cap of $ 10 billion, you know that company B is worth 10 times more than company A.
However, the market cap can also be used to compare companies within the same industry. For example, if you are looking at two tech companies, one with a market cap of $50 billion and the other with a market cap of $ 5 billion, you know that the first company is worth 10 times more than the second company.
Market cap is also a good way to measure a company’s growth. For example, if a company has a market cap of $1 billion today and grows to a market cap of $10 billion in five years, you know that the company has grown by 10x.
How to calculate the Market Capitalization of a Cryptocurrency?
To calculate the market capitalization of a cryptocurrency, you simply need to multiply the current price of the coin by the circulating supply.
For example, at the time of writing this post, Bitcoin (BTC) is priced at $23,349 and has a circulating supply of 19,111,087.00 BTC. This gives us a market cap of $$446,698,376,602.
Ethereum (ETH) is currently priced at $1,653.62 and has a circulating supply of 121,810,533.69 ETH. This gives us a market cap of $$201,517,286,824.
So, if you are looking at two cryptocurrencies, one with a market cap of $446 billion and the other with a market cap of $121 billion, you know that the second cryptocurrency is worth about five times more than the first.
What is Market Cap Used For?
There are a few different uses for market cap. First, as we mentioned earlier, it can be used to compare companies. If you are looking at two companies with a market cap of $1 billion and a market cap of $10 billion, you know that the second company is worth about 10 times more than the first.
Second, the market cap can be used to measure a company’s growth. If a company has a market cap of $1 billion today and grows to a market cap of $10 billion in five years, you know that the company has grown by 10x.
Third, the market cap can be used to assess the riskiness of a company’s stock. A company with a higher market cap is usually seen as being less risky than a company with a lower market cap. This is because a higher market cap means the company is worth more and has more to lose if something goes wrong.
Fourth, the market cap can be used to help you make investment decisions. If you are considering investing in a company, you may want to look at its market cap to get an idea of its size and growth potential.
Finally, the market cap can be used as a tool to find undervalued companies. If you find a company with a high market cap but think the stock is undervalued, you may consider investing in it.
FAQ
What is the difference between market cap and market value?
Market cap is simply a way to measure the value of a company by multiplying the current share price by the number of shares outstanding. On the other hand, market value is the actual value of a company’s shares in the marketplace. Market cap gives you an easy way to compare different companies, but it doesn’t necessarily tell you the true value of a company. Market value is a more accurate measure of a company’s worth.
What is the difference between market cap and enterprise value?
Enterprise value is similar to the market cap but also considers debt and cash. Enterprise value is calculated by adding the market cap to the debt and subtracting any cash. This is a more accurate way to measure a company’s value, but it can be more difficult to calculate.
What is a good market cap?
There is no one answer to this question. It depends on your investment goals and objectives. A company with a higher market cap may be less risky than a lower market cap, but it also may not have as much room to grow. It all depends on your individual circumstances.
What are the most heavily traded cryptocurrencies by market cap?
The most heavily traded cryptocurrencies by market cap are Bitcoin, Ethereum, Ripple, Litecoin, and Bitcoin Cash. These five coins make up most of the cryptocurrency market and have the highest market caps.
What is the total market cap of all cryptocurrencies?
As of August 2022, the total market cap of all cryptocurrencies is $2.2 trillion. However, this figure is constantly changing as individual coins’ prices fluctuate.
