The market capitalization (market cap) of a cryptocurrency refers to the total value of the coins in circulation in dollar terms.
It tells an investor or observer how valuable the digital asset is and gives them an estimation of its popularity among other traders.
The market capitalization of a cryptocurrency can mean several things. Read on to learn more.
What Does Crypto Market Cap Mean?
Market capitalization is calculated by multiplying the number of a token or coin that has been mined (i.e., its circulating supply) by its current price.
For example, if a CoinA has 1 million coins in circulation and currently sells at $10 a pop, its market cap is $10 million.
The formula for cryptocurrency market cap is:
Crypto Market Capitalization = Current Market Price of Crypto × Total Circulating Supply
From our example above, the market cap for CoinA = $10×1 million coins = $10 million market cap.
What Does Market Cap Tell You?
The market cap of a cryptocurrency can tell you something about its perceived value and the risk investors face when they buy it.
For example, Bitcoin has the largest market cap of all cryptocurrencies in existence today.
This digital currency is seen as the most stable and is often viewed as less risky compared to smaller cap coins or “shitcoins”.
A higher market cap also indicates that a crypto asset is dominant in the industry and could be primed for further growth in the future.
With dominance comes stability and a possibility that you the investor may earn a decent return on your investment.
Top 20 Market Capitalization Cryptocurrencies in 2021
Based on data from CoinMarketCap, the top 20 cryptocurrencies with the highest market capitalization as of September 8, 2021, are:
|Bitcoin (BTC)||$866.08 billion|
|Ethereum (ETH)||$410.11 billion|
|Cardano (ADA)||$78.11 billion|
|Binance Coin (BNB)||$69.18 billion|
|Tether (USDT)||$68.55 billion|
|Solana (SOL)||$62.38 billion|
|Ripple (XRP)||$51.29 billion|
|Dogecoin (DOGE)||$33.21 billion|
|USD Coin (USDC)||$28.61 billion|
|Polkadot (DOT)||$27.76 billion|
|Uniswap (UNI)||$14.32 billion|
|Binance USD (BUSD)||$12.75 billion|
|Bitcoin Cash (BCH)||$12.62 billion|
|Chainlink (LINK)||$12.24 billion|
|Terra (LUNA)||$12.03 billion|
|Litecoin (LTC)||$12.07 billion|
|Algorand (ALGO)||$11.20 billion|
|FTX Token (FTT)||$9.89 billion|
|Internet Computer (ICP)||$9.75 billion|
|Wrapped Bitcoin (WBTC)||$9.43 billion|
What is the Total Market Cap for Crypto?
The total market cap refers to the total value of all cryptocurrency assets in circulation. This includes the value of Bitcoin, Ethereum, and the various altcoins, stable coins, and tokens out there.
As of September 8, 2021, CoinMarketCap places the global crypto market at $2.11 trillion USD.
This value changes very rapidly depending on how individual crypto assets perform.
There are more than 10,000 tokens available worldwide and new ones are being added on a daily basis.
When considering the market cap of a coin, you can also look at its dominance by calculating its share of the total market cap of cryptos.
For example, as of today Bitcoin had a market cap of $866 billion while the total market cap for crypto is $2.11 trillion.
Bitcoin’s dominance = $866 billion/$2.11 trillion = 41%.
This means that Bitcoin currently makes up 41% of the entire cryptocurrency market.
What is Diluted Crypto Market Capitalization?
Generally, when you calculate market cap for a token, you are looking at the total number of coins already in circulation.
We can also calculate the market cap using a crypto asset’s maximum supply.
For example, Bitcoin currently has 18,810,700 BTC in circulation. The total number of BTC that can ever be mined is 21 million.
Thus, if you were to calculate the diluted market cap for Bitcoin based on its maximum supply, you have a diluted market cap of approximately $970 billion, instead of $866 billion.
Types of Crypto Based on Market Cap
The stock market classifies stocks as large-cap, mid-cap, small-cap, and micro-cap based on their market capitalization.
We can use similar classifications for cryptocurrencies as follows:
Large-Cap Cryptocurrencies: This refers to crypto-assets with a market cap of $10 billion or more. Examples include Bitcoin, Ethereum, Binance Coin, Cardano, Dogecoin, Ripple, and Polkadot.
Large-cap coins are considered to be stable and less risky, and they have shown dominance over time.
Investments in a large-cap coin is more conservative (less volatile) compared to a mid or small-cap asset. This could also mean you won’t see significant jumps in value or returns.
Mid-Cap Cryptocurrencies: Refers to crypto with a market cap between $1 billion and $10 billion. Examples include polygon, Stellar, VeChain, Ethereum Classic, Filecoin, and Wrapped Bitcoin.
Mid-cap cryptos are more volatile and may offer a significant upside or downside in performance. Investors can view these coins as growth assets and use them for diversifying their investment portfolio.
They may be less risky than small-cap cryptos.
Small-Cap Cryptocurrencies: Crypto-assets with a market cap between $300 million and $2 billion are called small-cap tokens. These usually include newer coins that are very volatile and are in their growth stage.
If you are comfortable with taking significant risks on your portfolio, you can potentially get a high return with these tokens.
Micro-Cap Cryptocurrencies: An example includes initial coin offerings. Many start-up cryptocurrencies qualify as micro-cap.
Micro-cap cryptos are highly risky and are mostly speculative in nature. You can lose your entire capital in a short timeframe, or you could be lucky, and make good money.
These cryptos may have a market cap between $50 million and $300 million. They are like the penny stocks of the stock market world.
Some micro-cap coins will go on to become small-cap and mid-cap coins, while many of them will fail along the way and disappear.
A good number of scam coins (aka shitcoins) also fall in this category and investors may fall victim to a “pump and dump” scheme.
Always do your due diligence when it comes to investing in crypto.
Crypto Market Cap vs. Crypto Market Value
Market cap is a reflection of the price of a crypto asset and the value placed on it by investors.
When assessing a cryptocurrency for potential investments, you should also be considering other factors.
For example, to measure the market value of a stock, you look at its return on equity, price-to-earnings ratio, long-term growth potential, price-to-sales ratio, and more.
We can apply similar strategies to crypto by looking at its performance i.e., the percentage increase in price over a specified period, etc.
There are some downsides to relying only on the market cap when deciding to buy a crypto coin, including:
1. A coin with unlimited supply can have an inflated market cap even when it has a low price.
For example, Uniswap (UNI) has a market cap of $14 billion and costs $23.38 per coin, while Dogecoin has a market cap of $33 billion and costs $0.25 per coin.
Although Dogecoin has a larger market cap, it currently has over 131 billion coins in circulation compared to just 611 million for UNI.
Also, Dogecoin has no supply cap while the maximum supply of UNI is capped at 1 billion.
2. Market cap calculations include coins that are not accessible due to people losing their private keys.
3. A highly speculative crypto environment encourages “pump and dump” schemes that often result in crypto assets without any utility or use case climbing in prices due to rumors, meaningless celebrity endorsements, and artificially inflated prices.