In the sea of cryptocurrency investors, it is a bit odd that someone enters this world without being well informed about it. Even nowadays, many people think that market cap is the amount of money that is in a particular cryptocurrency, but that is entirely wrong. In today’s article, we will explain what the market cap is, and right from the start, we have to mention that there is less of actually invested money compared to the market cap. Also, to find out more about it, check out the icorating.com. They will provide you with some valuable information on the crypto world.
Market cap is the market capitalization of a particular cryptocurrency
Market cap is short for market capitalization, meaning the total value of a particular cryptocurrency. It indicates how much the entire cryptocurrency is worth, and it is determined regarding the number of coins in circulation and the price per coin. As we have already mentioned, market capitalization is not the amount of money that is in a particular crypto value. It is the value of all the coins of that cryptocurrency.
That is most easily explained by the example of the island and the houses on it. Imagine there are five houses on the island and the first house for sale for 150,000 €. Then the other four homes are worth € 150,000 each and the total value of the houses on the island is € 750,000. A further € 750,000 is the market cap of the island since there are only five houses on the island, and one is sold for € 150,000.
The same goes for cryptocurrencies, and for example, we will look at Bitcoin, which has been recently worth $ 6,771.25. We have the information that its market cap is $ 114,892,789,161, and it has 16,967,737 BTC in circulation. If we multiply the total amount of Bitcoin by the price of one Bitcoin, we get $ 114,892,789,161, which is its market capitalization.
What is the real amount of money in cryptocurrencies?
The actual amount of money that is in Bitcoin I believe that no one can be certain about that, but what we do know is that it is much smaller than the market capitalization of Bitcoin itself, like any other crypto value.
Does the market value of a coin indicate its actual value?
A bit of a complicated question, but the answer is simple. The people themselves define the real value of each coin, so the real value is any value that the coin has because people have designated it that way. What should not be your primary indicator of a coin’s quality is certainly not its market cap, but what kind of project is behind the currency.
How does CoinMarketCap work: basic questions
How is the price of cryptocurrencies listed calculated?
We already said it: the data reported there is hugely reliable. Why? CoinMarketCap uses the weighted average of all stated prices in the markets where the cryptocurrency is available. Thus, it indicates an average cost, ideal as a reference when evaluating digital currencies. If you want to avoid biased data and obtain reliable information, this website provides it. You can use the price to, for example, check whether an exchange is offering a crypto value at a price below/above average.
What factor is used to order the ranking cryptocurrencies?
The price is a related factor, but not the determining one when ordering cryptocurrencies in the CoinMarketCap ranking. In reality, the accumulated market capitalization for each cryptocurrency is used. That way, we will be more objective when it comes to the importance of each in terms of price and adoption.
What is market capitalization?
Brilliant! But what is market capitalization? It is a simple indicator that allows obtaining the economic dimension of a company or a financial asset. As for cryptocurrencies, we multiply the current price by the number of cryptocurrencies in circulation. Remember that most digital currencies have a maximum number of coins that can circulate; thus, the supply and demand move market prices and capitalizations considerably.
What can CoinMarketCap be used for?
In addition to the typical ranking and to check prices, you can use it for many purposes that we will explain below.
Which cryptocurrencies are trending?
CoinMarketCap is also useful when it comes to indicators. You will be able to assess which cryptocurrencies were the most progressive in the last week, or the previous 24 hours. These periods serve to have an idea of which are the currencies with essential movements.
Compound (global) capitalization and bitcoin dominance
Other fascinating data for evaluating market behavior are compound capitalization and bitcoin dominance. The first represents the sum of the market capitalizations of all cryptocurrencies at CoinMarketCap. That can give us an idea of how much money is going in or out of the crypto sphere.
What is bitcoin’s domain in the global market used for?
Besides evaluating the relative importance of the leading cryptocurrency, you can use this data for your trading strategies. In particular, we use bitcoin indicator to find out if it is more convenient for us to invest using BTC as the base currency or if it will be better to use dollars (USD) as the base.
If you want to incorporate your data into a page or application, CoinMarketCap provides a powerful API or Application Programming Interface. The free version is simple, but it gives all the data required to get a global view of the cryptocurrency landscape. A paid version provides you with a more detailed version.
Where can you invest?
To invest in the most popular crypto value, we advise you to use one of many platforms. It is ideal for beginners but equally compelling for experts. Also, it is a regulated broker where you can invest quickly and very safely. It also provides advanced investment tools such as leverage, loss caps, and profits. To make matters worse, you can use the copy trading option to copy the transactions of other successful operators around the world.