What’s Market Cap?
In the Blockchain industry, Market Cap or Market Capitalisation is a method of measuring the performance of a cryptocurrency.
In this and the next article, we will show you how Market Cap works and how you can use it to make decisions about your investments. Keep in mind that Market Cap is only one of the factors that you should consider before making a cryptocurrency investment.
How is Market Cap calculated?
To calculate the Market Capitalisation of a cryptocurrency you need to multiply its current market price by the total number of coins in circulation (called Circulating Supply).
Market Cap = current Market Price x Circulating Supply
Example: let’s say that the crypto ABC today is worth 10.00 € and that the number of ABC coins in circulation is 50,000,000.
ABC has a Market Cap of:
10.00 € x 50,000,000 = 500,000,000
Although market capitalisation depends directly on the price, it is not necessarily the case that a more expensive cryptocurrency has a higher Market Cap. Look at the example of Ripple (XRP) and Bitcoin Cash (BCH):
XRP is priced at €0.27 and its Market Cap is €11.9 billion, much higher than BCH, which is worth €431.07 but has a Market Cap of €7.9 billion. As you can see, this is due to a higher Circulating Supply of XRP (43,708,646,822 coin) when compared to BCH (18,274,813 coin).
In the next article, we will explore how to earn from cryptocurrencies based on their Market Cap.