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But what is market capitalization, why does it matter, and how can it help evaluate a coin? Within our premium, members-only Coinist Insiders Network , our job is to identify early stage cryptocurrencies with a high probability for success before there is any retail hype around them.
Market capitalization is a well-known metric for traditional securities, but has unique implications in crypto. Market capitalization is a measure of the value of a security. It usually consists of multiplying the amount of outstanding stock shares by the current stock price.
There are around Traditionally, stocks and bonds have been analyzed via financial metrics and ratios. Measures like price-to-earnings ratio, earnings per share, the current ratio, earnings growth, and so on are used to examine stocks.
You can learn a lot about crypto just by checking market caps. First things first: Bitcoin is still the big dog in town. There are still relatively few valuable cryptocurrencies.
A high or low market cap can reveal a coin that is resistant to volatility, or vulnerable. But holders of tokens with small market caps are at risk of being crushed by larger traders. If several whales conspire to sell at the same time, the price of a token can crash to nothing instantly. This would be much tougher with Bitcoin and Ethereum, which have large market caps and are not easily manipulated. A market cap is merely a number reflecting the amount of circulating coins and their price.
As we mentioned, a large token holder can hugely influence the price of a coin. As well, some tokens have taken flack for developers holding large amounts of coins. If development teams hold large amounts of coins, they can retain control over the direction of the token, while presenting the appearance of a coin with a healthy market cap.
RIpple, before its recent bull run, was attacked for this. Bitcoin and Ethereum broke into mainstream news this year with the massive increases of their respective market caps. They, and the third coin on Coinbase, Litecoin, have all seen a boost recently. Coinbase announced customers with US bank accounts would be able to make instantaneous purchases, which was previously limited.
All three coins saw a boost in their respective market caps with this news. A healthy market cap is indicative of a strong coin, but developers or whales holding coins can mislead.
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Looking wuat Bitcoin? Bitcoin uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of bitcoins is carried out collectively by the network. Although other cryptocurrencies have come before, Markst is the first decentralized cryptocurrency - Its reputation has spawned copies and evolution in the space. With the what is bitcoin market cap variety of markets and the biggest value - having reached a peak of 18 billion USD - Bitcoin is here to stay. As with any new invention, there can be improvements mafket flaws in the initial model however the community and a team of dedicated developers are pushing to overcome any obstacle they come. It is also the most traded cryptocurrency and one of the main entry points for all the other cryptocurrencies. The block time is 10 minutes.
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But when it comes to cryptocurrency, many new and especially young people are joining every day, and many of those people may know nothing of how many financial basics like how a market cap works, or what it means. This is a classic mistake among new investors. In the simplest terms, a market cap represents the total estimated value of a company, or a cryptocurrency in our case. A market cap is calculated like this:. Imagine that we have a fictional cryptocurrency called Blockonomi Coin. Dogecoin, which we wrote about previously here , is quite popular and has been around for many years. Typically, it is among the top 50 most valuable cryptocurrencies. The reason why the Market cap of Dogecoin is so high is that despite the fact that each individual coin has a low price, there is currently billion Dogecoin in circulation. If we look on coinmarketcap.
But when it comes to cryptocurrency, many new what is bitcoin market cap especially young people are joining every day, and many of those people may know nothing of how many financial basics like how a market cap works, or what it means. This is a classic mistake among new investors. In the simplest terms, a market cap represents the total estimated value of a company, or a cryptocurrency in our case.
A market cap is calculated like this:. Imagine that we have a fictional cryptocurrency called Blockonomi Coin. Dogecoin, which we wrote about previously hereis quite popular and has been around for many years. Typically, it is among the top 50 most valuable cryptocurrencies. The reason why the Market cap of Dogecoin is so high is that despite the fact that each individual coin has a low price, there is currently billion Dogecoin in circulation.
If we look on coinmarketcap. At first glance, it may seem that Blocknet is worth a lot more than Dogecoin. This is in part because Blocknet only has a circulating supply of about 5 million units.
The way that market cap works is highly related to the number of coins on the market. If we compare bitcoin to EthereumEthereum has several times more the supply than bitcoin. This means that even if Ethereum had exactly the same market cap as bitcoin, each unit of Ether would still be worth less than each bitcoin. This again is simply because the total market cap is divided up into more individual units, thus making the price of each individual unit lower.
Another way to think of this is by comparing cryptocurrencies to a fiat currency like the dollar. Most cryptocurrencies have a fixed supply, meaning that there can only be a certain amount of them. With bitcoin, for example, there can only ever be 21 million individual coins. With dollars, there is no fixed supply. There is nothing stopping the central bank from printing more and more dollars.
This is tied into the market cap. The more dollars the central bank prints, the less each dollar is worth. The same is true for cryptocurrencies. If someone were to make a fork of bitcoin that had what is bitcoin market cap double the supply and that managed to keep the exact same market cap, then each unit of this fork would be worth exactly half of what a bitcoin is worth.
As there is nothing stopping a central bank or government from printing more what is bitcoin market cap more fiat currency, more and more investors are getting into cryptocurrency. While the value of fiat currency always drops over time, cryptocurrencies are reverse and tend to increase over time due to their limited supply. Cash, on the contrary, is inflationary by design. You can view the top coins and their market caps in our right here on Blockonomi.
When someone is looking for a new cryptocurrency to invest in, they need to consider the market cap just as much as they consider the token or coin price. Dogecoin has what is bitcoin market cap relatively well over the last few years. However, Dogecoin has always had a very low price per coin. A bad investment strategy would be to buy up a large amount of Dogecoin with the expectation that the price would double, triple, or even hit a price like one dollar in the short term.
You may be thinking to yourself, many cryptocurrencies in the top 50 are worth well over a dollar. So if you invest a large sum into Dogecoin and it goes to a dollar, what is bitcoin market cap will make a fortune. But we need to consider the market cap. What would the market cap of Dogecoin need to be if each one was worth one dollar? That would make it the number two cryptocurrency by market cap today, being worth more than Ethereum and catching up quickly to bitcoin.
While not absolutely impossible, the odds of such movement happening within a short timescale is practically impossible.
Dogecoin can be a good investment for some portfolios, but when investing in a currency like it, you need to have a realistic plan based on a solid understanding of how market cap works. Imagine, for instance, that the previously mentioned fictional Blockonomi coin has just been created and is now on the market for the first time.
Therefore, the market cap does not represent the amount of money invested in a coin or token, it is simply a calculation based on the current going price times number of shares available. So what does all this mean for you? It is important to not only look at the price of each individual coin or token but to understand where that price comes from, and where the cryptocurrency in question sits in comparison to other cryptocurrencies by market cap.
No Spam. Robert is News Editor at Blockonomi. A true believer in the freedom, privacy, and independence of the future digital economy, he has been involved in the cryptocurrency scene for what is bitcoin market cap. All content on Blockonomi.
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As a result, the price of bitcoin ie to increase as its cost of production also rises. There are no physical bitcoins, only balances kept on a public ledger in the cloud, that — along with all Bitcoin transactions — is verified by a massive amount of computing read article. Bitcoin Value and Price. How many stories have you heard about folks having hundreds of bitcoins in their pen drive and then completely forgetting about it? Other Cryptocurrencies. Initial Coin Offerings. If you are looking to invest then please keep in mind that market cap is just one of the many tools out. Traditionally, stocks and bonds have been analyzed via financial metrics and ratios. Working For Bitcoins. Financial Markets. No one knows who invented Bitcoin, or at least not conclusively. We add new courses from industry-leading experts every week You earn Blocks for everything you do with Blockgeeks Blocks can be traded for cryptocurrency and members-only discounts We have waht amazing community of experts ready to answer your questions Have questions or need guidance? You only have access to basic statistics. Login Newsletters. Further Content: You might find this interesting as .