Market Capitalization (Market Cap) is a total dollar value given to an asset (like Bitcoin), or an entire asset class (all cryptocurrencies), calculated by taking that asset’s circulating supply and multiplying it by the market price of that asset.
MARKET CAPITALIZATION = CIRCULATING SUPPLY x ASSET’S MARKET PRICE
So for BTC, which is currently priced at USD $23,150 and has a circulating supply of 19,111,706 coins, the market cap would be $442,435,993,990, or roughly $442 billion.
19,111,706 x US $23,150 = $442,435,993,900
Market Capitalization should not be confused with Fully Diluted Market Cap, which takes into account an asset’s max supply instead of circulating supply.
Market Capitalization is also used as a metric to gauge the overall health and growth potential of a cryptocurrency and whether it might be a good investment, compared to other cryptocurrencies.
Market Capitalization is also used to classify and group cryptocurrencies by their individual market cap sizes.
This includes large-cap, mid-cap, and small-cap cryptocurrencies.
Classification in this manner makes it easier for investors and analysts to compare various trends and performance metrics of similarly sized cryptocurrencies.
Cryptocurrencies with larger market caps are thought to be more stable than cryptocurrencies with smaller market caps.
However, because small-caps cryptocurrencies tend to be more volatile in price, they find huge followings by cryptocurrency degen traders looking for trading opportunities in the up and down movements in price.