Market capitalization can be an important factor for stock market investors. But it’s not quite the same for crypto investors.
While stock market capitalization — the total value of a company’s total shares of stock — can help investors build and maintain a balanced investment portfolio, experts say those rules don’t exactly apply for crypto investors.
Here’s what crypto investors should know about market cap, and how it should (or shouldn’t) factor into your strategy.
What Is Cryptocurrency Market Capitalization
Crypto market capitalization is the total value of a cryptocurrency. Where stock market capitalization is calculated by multiplying share price times shares outstanding, crypto market capitalization is calculated by multiplying the price of the cryptocurrency with the number of coins in circulation.
For example, Bitcoin’s market capitalization is found by multiplying the current number of coins in existence — over 18 billion — with Bitcoin’s price at a given time. As Bitcoin’s price fluctuates, which it does frequently, so too does its market capitalization. In the past few weeks, Bitcoin’s price has been between around $45,000 to $55,000, which translates into a significant range in market capitalization:
- $45,000 x 18.8 million = $846 billion
- $50,000 x 18.8 million =