What Is Cryptocurrency Market Cap? Why Is It Important?

By November 23, 2020March 29th, 20224 minute read
What is cryptocurrency market cap and why is it important - WazirX

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. 

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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.

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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 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.

Is Cryptocurrency Safe To Invest In?

Cryptocurrency investments are subject to market risks, but if sufficient security measures are not taken, trading accounts can be maliciously accessed. Investments come with risks and uncertainties, and we cannot claim that any digital currency investment is risk-free. Buying and selling cryptocurrencies can be risky even if the trader is knowledgeable about the market and treats their coins carefully.

What Are The Best Cryptocurrencies To Invest In?

The best cryptocurrencies to invest in would be the ones you study and analyze in detail. Some of the most popular cryptocurrencies include Bitcoin, Ethereum, and many altcoins such as Tron, Ripple, Litecoin, etc.

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.

Is Ethereum Safe To Invest?

The Bitcoin market is unquestionably more volatile than the stock market. This may not be the market for you if you are incredibly risk-averse. Ethereum, on the other hand, may be a terrific investment for you if you're a diamond-handed investor who won't lose sight of short-term losses. Ethereum is a relatively safe investment as it is also based on blockchain.

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 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 Bitcoin And Cryptocurrency The Same Thing?

Bitcoin is a cryptocurrency that was designed to facilitate cross-border transactions, eliminate government control over transactions, and streamline the entire process without third-party intermediaries. The absence of intermediaries has resulted in a significant reduction in transaction costs. Satoshi Nakamoto, the creator of Bitcoin, created the first cryptocurrency in 2008. It began as open-source software for money transfers. Since then, plenty of cryptocurrencies have emerged, with some focusing on specific fields.

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.

Who Invented Cryptocurrency?

Satoshi Nakamoto invented cryptocurrencies and the technology that makes them function in 2009. The presumed pseudonymous individual or persons who invented Bitcoin used this identity. In addition, Nakamoto created the first blockchain database. Even though many people have claimed to be Satoshi Nakamoto, the person's identity remains unknown.

Are Cryptocurrencies Legal In India?

In India, cryptocurrency is legal, and anyone can buy, sell, and trade it. Because India lacks a regulatory system to regulate its operations, it is presently uncontrolled. According to the Ministry of Corporate Affairs, companies must now document their crypto trading/investments inside the financial year.

Is Pi Cryptocurrency Safe?

Pi Network (PI) is the newest digital token to catch the cryptocurrency community's interest, even before it has wholly debuted. Some users see it as a chance to get engaged in a cryptocurrency 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 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.

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 Now?

Litecoin has an 84 million coin limit and a 12.5 LTC block reward, which is more than other cryptos. Miners will find that mining Litecoin is faster than mining any other cryptocurrency because the average time to mine a Litecoin is under two minutes. Because of its increasing popularity, Litecoin is the best of all the altcoins. At WazirX, the current price of Litecoin is ₹12,410.22.

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 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.

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.

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

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 Market Cap?

Commonly market capitalization is called 'market cap.' In Bitcoin or another cryptocurrency, all of the coins that have been minted are considered market capitalization (or just 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. It might show a cryptocurrency's potential growth and whether it is good to buy compared to others as a vital statistic

How Cryptocurrency Works?

Cryptocurrencies use cryptography technology to keep transactions and their units (tokens) secure. Cryptocurrency works via a technology called the blockchain. A blockchain is a decentralized technology that handles and records transactions across numerous computers. The security of this technology is part of its value.

How To Invest In Cryptocurrency?

There are two ways of investing in cryptocurrency, mining and via exchanges. Cryptocurrency mining is considered the procedure of verifying and adding transactions to the blockchain public ledger. Another option is via cryptocurrency exchanges. Exchanges generate money by collecting transaction fees, but there are alternative websites where you can interact directly with other users who want to trade cryptocurrencies.

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

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.

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.
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