Market cap refers to the overall valuation of cryptocurrency in terms of the supply of coins. Cryptocurrencies are ranked in terms of their market cap, and this measure can also be seen amongst stocks and financial assets. Market cap is more meaningful than the price, as it holds vital information allowing both traders and investors to gain proper insight into the asset’s value.
Meaning Of Market Cap
Market cap or market capitalization is the product of the circulating supply of a cryptocurrency and its current price. It is an important metric in the world of cryptocurrency which is used in ranking these digital assets as per their relative sizes.
- Market Cap = Circulating Supply x Current Currency Price
Bitcoin’s Market Cap
Bitcoin ranks highest in the world of cryptocurrency in terms of its market cap, which has hit the $280 billion mark recently, following its price surge to $15000. Its current market value exceeds $112 billion, whereas Ethereum stands second with a market cap of $20 billion. Bitcoin’s current market cap exceeds some of the big-shot companies of the United States. It recently overtook major publicly-listed companies like PayPal, Verizon, Salesforce, Adobe, Netflix, Disney, Bank of America, and Coca-Cola.
However, it still has a long way to go before catching up on JPMorgan Chase, Mastercard, and Visa. Bitcoin has to attain a price of $23000 for reaching the market cap of $426 and surpassing these above-mentioned corporates. As per Torso Investments’ portfolio manager, Dan Weiskopf – any Bitcoin investment between $10 billion – $20 billion would be more profitable than Apple’s plan of stock buybacks. Often investors draw comparisons between Bitcoin and gold. Such comparisons have received greater impetus in the modern times of economic uncertainty. Bitcoin has to attain the price level of $38000 per BTC for surpassing the market cap of the yellow metal, which stands at around $8 to $9 trillion.
Comparison Between Price & Market Cap For Calculating Value
Price is uni-dimensional and offers information on the trading value of each coin. However, it doesn’t reflect the true value or scarcity of an asset. Whether a commodity or service is available or not determines its demand and supply equation to a great extent. Rare products are valued more compared to the ones in abundant supply. Market cap considers availability, which offers deeper insight into the digital currency’s value while you buy cryptocurrency in India.
Suppose two cryptocurrencies are worth $1, one of them has a circulating supply of 1 million, whereas the other has a circulating supply of 1 billion. The first currency will have a market cap of $1 million ($1 x 1,000,000) and the second one will have a market cap of $1 billion ($1 x 1,000,000,000). This example proves that you cannot gain an understanding of the full story by just looking at the price.
Drawbacks Of Market Cap
Market cap is an excellent metric for ranking cryptos. However, it suffers from certain loopholes which are a direct result of the inherent imperfections in circulating supplies as mentioned below:
- You cannot understand the cumulative crypto investment from its market cap. It just reveals a picture of the circulating supply’s total value at its current market price.
- The market cap changes drastically for illiquid cryptocurrencies, even with a small number of trades. This could bring a spike in the price of the crypto, and ultimately its market cap.
- As more coins are mined, its supply increases in the market. This enhances its level of supply and the market cap.
Final Words
Market cap shows a clear picture of the level of investment risk involved in a particular crypto. A high or low market cap reveals whether a coin is resistant or vulnerable to price volatility. Coins having smaller market caps are more prone to price fluctuations whenever a big news hits the market. Holders of small cap crypto are at heightened risk of being crushed by big traders whenever they conspire to sell simultaneously, causing the token price to crash. This is not the case with coins having bigger market caps like Bitcoin and Ethereum. Bitcoin live price in India as on 24.11.2020 is 1,386,782 INR and investors can be guaranteed that the price of this premier crypto won’t be manipulated that easily. While sudden alterations in a coin’s circulating supply can cause the market cap to change drastically, it is still considered to be the best metric of ranking coins and holding comparisons of their overall value.
Also you can download the app and Start Trading Now!
Android App – Cryptocurrency Exchange
iOS App – Cryptocurrency Exchange
Frequently Asked Questions
How Safe Are Cryptocurrencies?
Cryptocurrencies can be safe, but your crypto wallets can be hacked if proper security steps are not performed. There are also dangers and uncertainties associated with investments, and we cannot declare any virtual currency investment risk-free. Buying and selling cryptocurrencies does not have to be dangerous if the trader is well-versed in the market and treats his coins with care.
Is Crypto Legal In India?
Cryptocurrencies are legal in India, and anyone can purchase, sell, and exchange them. It is currently uncontrolled, as India lacks a regulatory structure to oversee its operations. Per the Ministry of Corporate Affairs, companies must now record their crypto trading/investments within the financial year. In cases where a person receiving the gains is an Indian tax resident, or the cryptocurrency is regarded as domiciled in India, cryptocurrency transactions have been taxable in India
Is Cryptocurrency Banned In India?
No, cryptocurrency is not banned in India. India has seen its ups and downs in the crypto sector concerning its legal status. The Reserve Bank of India (RBI) issued a circular in April 2018 advising all organizations under its jurisdiction not to trade in virtual currencies or provide services to assist anyone in dealing with or settling them. A government committee proposed outlawing all private cryptocurrencies in mid-2019, with up to ten years in prison and severe penalties for anyone dealing in digital currency. The Supreme Court overruled the RBI's circular in March 2020, allowing banks to undertake cryptocurrency transactions from dealers and exchanges.
Is Pi Cryptocurrency Safe?
Pi Network captured the crypto community’s interest even before it officially debuted. Its innovative mobile mining approach and user-friendly design simplify crypto adoption for a broader audience. Some users see this as a chance to get engaged in the crypto from the beginning and profit in the future, similar to how early Bitcoin adopters made huge profits by mining and keeping the coin. Other users have compared Pi to a worthless multi-level marketing (MLM) scheme.
What Is Cryptocurrency?
A cryptocurrency is a digital currency secured by encryption, due to which chances of activities such as counterfeiting and double-spending taking place get close to impossible. Cryptocurrencies get created on blockchain technology ( a distributed ledger enforced by a distributed network of computers). Cryptocurrencies are unique in that they do not get issued by any central authority. The term "cryptocurrency" comes from the encryption techniques used to keep digital currencies and the network safe.
Is crypto legal?
Crypto is legal in most countries, including India. While nations like the U.S. and many in Europe have regulatory frameworks, others like China have strict bans.
Is Mining Cryptocurrency Legal?
Cryptocurrency mining can be time-consuming, expensive, and sporadically profitable. Mining has an appeal for many cryptocurrency enthusiasts as miners are paid directly with crypto tokens for their efforts. The legality of cryptocurrency mining is dependent on where you live. In India, there is no restriction on crypto mining.
What Is The Safest Cryptocurrency To Invest In?
Bitcoin has had the highest market capitalization, has been around the longest, has the most experienced development team, and has enormous network impact and brand recognition. As a result, while trading cryptocurrencies, the rate of return on Bitcoin is commonly used as a benchmark. However, the risks associated with cryptocurrencies remain, and the safest cryptocurrency for you depends on your analysis.
How To Invest In Cryptocurrency Stocks?
Cryptocurrency can be purchased in two ways: through mining or exchanges. The process of confirming and adding transactions to the blockchain public ledger is known as cryptocurrency mining. Cryptocurrency exchanges are another option. Exchanges make money by charging transaction fees, but there are alternative platforms where you may communicate directly with other cryptocurrency traders.
How To Invest In Cryptocurrency In India?
There are two ways of investing in cryptocurrency, mining and via exchanges. Cryptocurrency mining is the process of verifying and adding transactions between users to the blockchain public ledger. Purchasing cryptocurrency in India is a straightforward procedure where investors simply participate by registering with a crypto exchange such as WazirX. After registering for an account, citizens can trade multiple cryptocurrencies, store cryptocurrency in wallets, and more.
Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.
