Why is Market Cap Important in Crypto?

There are over 20 000 digital assets offered by various crypto exchange platforms to trade and generate income. Looking at the popular crypto ranking Coinmarketcap, we can see their variety with indicated prices, trade volumes, and market cap and may place them in increasing order from the lowest cap to the largest cap assets.

Three main characteristics of crypto coins allow us to have a picture of their level of dominance in the market:

  • cryptocurrency live rate – the current value of the asset;
  • capitalization – the entire value of all coins in circulation;
  • trade volume – the amount of all trades that took place, usually taken for the last 24 hours. It shows the level of the asset’s liquidity.

Let’s find out how to understand the cryptocurrency market capitalization.

What is Market Cap Cryptocurrency?

Market cap indicates the total price of the project’s assets that are now in circulation. To get the market cap, you should multiply the cryptocurrency market live price by the number of outstanding coins. All digital assets can be divided into three groups:

  • Coins with large capitalization. Dogecoin, Binance USD, Ripple, Bitcoin, Ethereum, and USD Coin fall in this category, for their cap exceeds 10 billion. These assets are less sensitive to market tendencies and changes and more resistant to investors’ sentiment. These assets are considered to be the most dominant market players that set the trend for other coins, which we have witnessed many times. Buying coins with a large cap makes sense if you plan long-term investments, for these assets rarely demonstrate quick multiple increases. Instead of aggressive growth, they show a stable and gradual increase. Investments in these assets pose less risk.
  • Middle capitalization. Polygon, Cardano, Dai, Polkadot, Tron, Litecoin, Solana, Chainlink, and other projects fall in this category. These are competitive projects that are developing rapidly, improving their place in the ranking. The cap ranges between $2 and 10 billion. Such assets pose middle-risk investments and have a much higher potential for growth compared with large-cap coins. At the same time, they are less risky investments than low-cap assets. 
  • Low-cap coins. These are assets with a capitalization of $300 million to $2 billion, and the most known of them are Bitcoin Cash, Stellar, ApeCoin, near, etc. These are highly volatile assets, usually released by young projects that are only emerging and finding a niche in the industry. They are the most sensitive to market fluctuations and easily drop, following the market leaders. On the other hand, such coins have a much bigger potential to increase in the long-term perspective. Such assets should be carefully picked. No doubts that many small-cap coins are up-and-coming, but it requires research.

Experienced crypto investors recommend buying coins from these three groups. In such a way, you will have the most established and trusted assets as well as small but promising coins. Let’s see how does market cap work crypto.

How Does Market Cap Work Crypto?

Why is capitalization so important? When choosing an asset for investment, the rate of cryptocurrency, cap and trade volume indicators help traders decide whether the asset has liquidity and is strong enough against market volatility. Also, capitalization allies to understand the place of a project in the market and how if other investors are interested in it, which directly affects the future of the asset.

To get actual crypto market live price and capitalization, you may track the Coinmarketcap resource as well as any large and credible crypto platform. It may be, for example, WhiteBIT – a regulated crypto platform registered in Europe. It offers all the necessary tools for efficient trading, including crypto charts where you can track how the asset’s price reacts to market volatility by setting different timeframes.

Last Updated on December 21st, 2023