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
What Is Virtual Currency?
Virtual currency is a type of uncontrolled digital currency that can only be used online. It is exclusively stored and transacted using designated software, mobile or computer applications, or unique digital wallets, and all transactions are conducted through secure, dedicated networks. Because digital currency is just currency issued by a bank in digital form, virtual currency is not the same as a digital currency. Virtual currency, unlike ordinary money, is based on a trust structure and cannot be issued by a central bank or other banking regulatory organization.
Are Cryptocurrencies A Good Investment?
Cryptocurrency has the potential to make you extremely wealthy, and the potential to cause you to lose your money. Crypto assets, like any other investment, come with many risks and potential rewards. Fundamentally, cryptocurrency is an excellent investment, particularly if you want to gain direct exposure to the demand for digital currency.
Is Cryptocurrency Legal In India?
In India, cryptocurrencies are legal; anyone can purchase, sell, and trade cryptocurrencies. They are currently unregulated; India does not have a regulatory framework in place to regulate its functioning. According to the Ministry of Corporate Affairs (MCA), companies must now declare their crypto trading/investments during the financial year, according to the Ministry of Corporate Affairs (MCA). Cryptocurrency transactions have been taxable in India when people receiving such gains are Indian tax residents or where the crypto is considered to be domiciled in India
Can I Invest In Cryptocurrency?
Yes, with exchanges like WazirX, you may invest in cryptocurrency in India. To begin, go to the WazirX website and register. After that, you will receive a verification email. The link received by verification mail will only be available for a few seconds, so make sure you click it as quickly as possible. This will successfully verify your email address. The following step is to set up security, so choose the best solution for you. After you've set up the security, you'll be given the option of continuing with or without completing the KYC process.
What Is Crypto?
Crypto or a cryptocurrency is a digital currency protected by cryptography, making counterfeiting and double-spending nearly impossible. Blockchain technology is used to produce cryptocurrencies (a distributed ledger enforced by a distributed network of computers). Cryptocurrencies are distinct in that a government does not issue them. The word "cryptocurrency" refers to the encryption methods employed to keep digital currencies and the network secure.
How Many Cryptocurrencies Are There?
There are over 5000 other digital currencies available on the internet in addition to Bitcoins. The only problem is that they haven't gotten the users' attention. Besides Bitcoins, a few other digital currencies have gained popularity among users. It's been more than ten years since Bitcoins were first released, and now they've achieved new heights thanks to their phenomenal success.
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.
What Is The Meaning Of Crypto?
A cryptocurrency is a digital currency that is secured by the process of cryptography, making counterfeiting and double-spending almost impossible to happen. Blockchain technology is used to produce cryptocurrencies ( a distributed ledger enforced by a distributed network of computers). Cryptocurrencies are distinct in that a centralized authority does not issue them.
Which Cryptocurrency Is Best To Invest In 2021?
Many altcoins are flourishing to invest in. Some cryptocurrencies with great potential are Ether, Ripple, Tron, and more. Investors are trying to diversify their portfolios and are flocking to the leading cryptocurrencies. Many growing businesses are already accepting cryptocurrency as acceptable payment methods.
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.
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.
