January 26, 2020 / Beginners

What Is Cryptocurrency Market Cap; The Principle Of Its Formation

market cap

In this article, we answer the question: what is the cryptocurrency market cap? In simple words, this is the cost of a coin. therefore, it is an indicator describing the entire value of a coin around the world. The market cap of cryptocurrencies includes the number of coins mined, but not their turnover.

Market cap is the most important parameter for evaluating the value of a coin. It attracts the attention of investors to the coin. The greater the popularity of cryptocurrency, the less its volatility. And the lower the volatility, the more difficult it is to influence the value of cryptocurrency.

Factors That Affect Cryptocurrency Market Cap

Let’s consider the factors that affect its growth.

There are two main factors:

  • The total number of coins that are in circulation;
  • the exchange rate of these coins.

In the case of the well-known Bitcoin, its number of coins in circulation keeps growing every day. This is due to the uninterrupted mining and the growth of hashrate. There is an opinion that the growth of the hashrate of the network contributes to the growth of this coin. We can describe this with a simple principle: the more difficult it is to get cryptocurrency, the higher its rate will be. The higher the demand for the coin, the higher its rate will be, and, accordingly, the market cap itself. However, as we see, this rule has not been applied recently, and while the hashrate sets new highs, the price of Bitcoin is in no hurry to take similar steps.

What Does Affect Coins Demand

The following factors influence coin demand:

  • Crypto media;
  • the behavior of different traders on well-known exchanges;
  • new technologies, innovations in the crypto world;
  • forecasts for the cryptocurrency rate from financiers, traders, etc.

Dynamics Of The Cryptocurrency Market Cap In Recent Years

At the beginning of 2018, the level of market cap rose to “heaven”. It reached the $ 830 billion mark. But, unfortunately, this indicator fell very fast, and as quickly as it grew. Six months later, the market cap of all coins was only $ 300 billion.

coinmarketcap cap

Since reaching maximum levels, the minimum value has been fixed in early 2019 with a figure below $ 120 billion. As you can see, this figure is 7 times less than the indicators at the beginning of 2018. At the time of writing, the aggregate capitalization is at $ 230 billion, according to CoinMarketCap.

Why Do You Have To Monitor The Market CapIndicator

Of course, to affect the volatility of Bitcoin, you will have to spend huge amounts of money. This amounts to millions of dollars. But the coins with low market cap, lower costs are needed. For this reason, coins with a low market cap can suddenly fall several times or vice versa grow. You can earn money on this, buy coins at a low cost, and after increasing its value, sell these coins and get a decent income. Here are live examples: last year, Binance Coin + 127.56%, Bitcoin + 86.78%. But you can not only make a profit on this. With the help of the capitalization rate, you can determine the demand for a coin in the market, and this is useful information for traders.

What Are Profitable Cryptocurrencies

Many veterans invest their funds in TOP-10 coins. This is the right approach because such coins have more prospects and chances that they will increase in price, because of which the trader will be able to get a solid profit. As for the less popular coins that were not included in the TOP-10, their success will depend on marketing, the versatility of the product, as well as on favorable offers for its customers, and this will cause interest in cryptocurrency. For a coin to get into the TOP-10, it will not be enough just to launch this cryptocurrency and promote it well, because the market is developing smoothly, gradually and many investors have already decided where to invest their funds.

Conclusion

So, the cryptocurrency market cap is one of the main features of any cryptocurrency. It determines the value of your chosen coin, like an indicator of the “strength” of a cryptocurrency. It is for this characteristic that you can choose an asset for a successful investment. In most cases, it is cryptocurrencies with a low level of market cap that show a rapid increase in market value. Therefore, you need to closely monitor these important features of coin growth, and then you will have a great opportunity to make a profit on cryptocurrency.

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