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Market Capitalization 101


What is market capitalization?

The entire value of all the coins that have been mined in the market capitalization (or market cap) of a cryptocurrency like Bitcoin. It’s computed by multiplying the current market price of a single coin by the number of coins in circulation. The total dollar worth of all the shares of a company’s stock or, in the case of Bitcoin or another cryptocurrency, all the coins that have been minted is known as market capitalization (or market cap). The market cap of a cryptocurrency is derived by multiplying the total number of coins mined by the current price of a single coin.

Market capitalization can be thought of as a rough indicator of how stable an item is likely to be. However, much as a larger ship can safely traverse bad weather, a cryptocurrency with a much larger market cap is more likely to be a more stable investment.

What can market capitalization be used for?

Market capitalization allows you to compare the overall worth of one cryptocurrency to that of another, allowing you to make better investing decisions. Cryptocurrencies are divided into three groups based on their market capitalization:

  1. The market capitalization of large-cap cryptocurrencies, such as Bitcoin and Ethereum, exceeds $10 billion. Because they have a proven track record of growth and typically have better liquidity, investors consider them to be lower-risk investments. This means they can sustain a bigger volume of individuals cashing out without the price being significantly damaged.
  2. Mid-cap cryptocurrencies have market values ranging from $1 billion to $10 billion, and they are often thought to have greater untapped upside potential but also more risk.
  3. Small-cap cryptocurrencies have a market capitalization of less than $1 billion and are the most vulnerable to market sentiment fluctuations.

What factors can influence a company’s market capitalization?

The market capitalization of a corporation can be influenced by a number of variables. Changes in the number of shares issued, as well as significant changes in the value of the shares, could have an influence. Any exercise of warrants on a company’s stock will result in a rise in the number of outstanding shares, diluting the stock’s current value. Because warrants are often exercised below the market price of the shares, it may have an impact on the company’s market valuation.


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