Everything about cryptocurrency market capitalization [2024년]

Market capitalization is key information when evaluating company value. The same goes for cryptocurrency. Market capitalization is the simplest and most important criterion for knowing how much public attention a given coin is receiving.

In this article, we take a closer look at the concept and calculation of market capitalization, and its meaning in cryptocurrency.

What is market capitalization?

A company’s market capitalization is calculated by multiplying the number of shares outstanding by the price per share. Through this, the size of the company can be measured and the investment risk of the company can also be inferred.

Market capitalization formula

Let me give you an example. Suppose we want to calculate the market capitalization of company A.

• Number of issued shares of company A = 20 million shares
• Market price of company A stock at that time = $20 per share

To calculate the market capitalization of Company A, multiply the number of shares (20 million shares) by the stock price ($20 per share). Market cap is $400 million It works.

Interpreting market capitalization

Market capitalization is often used to classify companies into different categories based on their market value. The categories are:

• Nano-cap: Market capitalization less than $50 million. Nanocap companies are the riskiest companies to invest in. Nanocap companies are startups or small businesses, often in the early stages of their business life cycle. Because of their small size, they may not have an established track record or strong financial position.
• Micro-cap: Companies with a market capitalization between $50 million and $300 million. Microcap companies, often called penny stocks, are relatively young and have equal potential for growth and decline.
• Small-cap: Market capitalization between $300 million and $2 billion The company falls under the small cap category. Investing in small-cap stocks is often considered high risk, but can yield high returns that are correlated with the company’s gradual growth over time.
• mid-cap(medium cap): Market capitalization between $2 billion and $10 billion. Investing in mid-cap stocks is considered less risky compared to small-cap stocks. Mid-cap stocks generally refer to fast-growing companies that have moved away from small-cap stocks.
• Large-cap stocks (Large-cap): Companies with a market capitalization exceeding $10 billion. Investing in large-cap companies provides investors with a reassuring level of stability and reliability.
• mega cap(Mega-cap): Market capitalization over $100 billion. Megacap companies typically offer lower returns but offer significant safety for your investment. Examples of these companies include Apple, Microsoft, and Amazon.

Latest news on cryptocurrency and market capitalization [2024년]

November 27, 2024Dogecoin (DOGE)’s market cap is $57.8 billion, surpassing Porsche’s market cap of $56.1 billion. Tesla CEO Elon Musk continuously mentioned Dogecoin on

November 22, 2024the market capitalization of the stablecoin Tether (USDT) ranked 142nd, surpassing global bank Citigroup. As of this day, Tether’s market capitalization was $132.3 billion.

November 22, 2024the total market capitalization of cryptocurrency exceeded $3.4 trillion, surpassing France’s gross domestic product (GDP) of $3.17 trillion. It is smaller than the UK’s GDP of $3.58 trillion.

November 15, 2024Ripple (XRP) continued its short-term strength and recovered $50 billion in market capitalization.

November 13, 2024Bitcoin market capitalization surpassed Saudi Aramco and ranked 7th in the global asset rankings. As of this day, Bitcoin market capitalization recorded $1.798 trillion.

coinbaseCOIN50, the 50th largest cryptocurrency by market capitalization

November 12, 2024Coinbase launched COIN50, an index of the top 50 cryptocurrencies by market capitalization.

November 11, 2024the total cryptocurrency market capitalization has surpassed $3 trillion. On this day, Bitcoin market capitalization surpassed silver and ranked 8th in the ranking of global companies and major assets.

November 8, 2024Ethereum’s market capitalization reached $352.7 billion, surpassing Bank of America (BofA).

November 6, 2024Bitcoin has re-entered the top 10 assets by global market capitalization. On this day, its market capitalization was in the 1.4 trillion dollar range, ranking 9th. 1st to 3rd place were gold, Nvidia, and Apple.

October 28, 2024Solana (SOL)’s market capitalization reached $83.65 billion, surpassing the $83.52 billion market capitalization of global payment giant PayPal.

investor sentiment

Stock prices and market capitalization are influenced by expectations about a company’s future growth. If the growth rate is expected to be high, the market capitalization may be higher, and conversely, if the growth rate is expected to be low or falling, the market capitalization may be low.

Market capitalization is important when a company wants to acquire another company. Large companies often acquire smaller companies, especially micro and small cap companies, to help the larger companies grow without much risk.

Calculate the market capitalization of a stock

Similar to the previous example, the market capitalization of a stock is determined by multiplying the number of shares by the price per share. Expressed mathematically, market capitalization (MC) = number of issued shares x stock price:

However, unlike market capitalization, free-float market cap is used in several widely known stock indices such as S&P 500 and Dow Jones Industrial Average. These stocks use float-adjusted market capitalization as well as major index funds and exchange-traded funds.

for example

Let’s take a company called ‘Company Ade’ as an example. The company has 50 million shares of public stock and 30 million shares of restricted stock, most of which are held by management. Current valuations value the stock at $45 per share.

In this case, you are given floating shares (tradable shares) and restricted shares. To determine market capitalization, we calculate shares outstanding by adding free float and restricted shares:

• circulation Stock: 50 million shares (50 10^6)
• Restricted stock: 30 million shares (30 10^6)
• Number of shares issued = Number of outstanding shares + Number of restricted shares
• Number of shares issued = 50,000,000 + 30,000,000
• Number of shares issued = 80,000,000 (or 80 10^6)
• Stock price: $45 per week

reference: The number of shares outstanding is the sum of floating shares and restricted shares.

official use

• MC = 80,000,000 shares, $45 per share
• MC = $3,600,000,000

We can simplify this to $3.6 billion. thus The company has a market capitalization of $3.6 billion.

Calculating market capitalization of cryptocurrency

Likewise, you can calculate the market capitalization of a cryptocurrency. This involves multiplying the price of a cryptocurrency asset by its circulating supply.

Let’s take Bitcoin as an example. As of November 27, 2024, the circulating supply of Bitcoin is 19,788,190. The price of one Bitcoin is $96,355.

Market capitalization = market price × circulating supply

19,788,190 x $96,355 = $1,906.8 billion

For reference As of November 12, 2024, Bitcoin’s market capitalization recorded $1.738 trillion (approximately 2448 trillion won), exceeding the market capitalization of silver ($1.709 trillion).

reference: This calculation can also be applied to other fiat currencies.

If you want to check the market capitalization of a popular cryptocurrency, you can utilize resources like the BeInCrypto price tracker. The platform provides comprehensive information about existing coins and tokens.

Comparison of market capitalization with other indicators

In addition to market capitalization, numerous other indicators provide cryptocurrency investors with an effective framework for fundamental analysis of cryptocurrencies. Let’s compare these metrics side by side with market capitalization and evaluate them comprehensively.

Comparison of market capitalization, assets, and profits

Category Definition Value Source Financial Insight OtherMarket Capitalization Represents the market’s perception of a company’s value based on its stock price. Derived from the total value of all its shares. It reflects the market’s perception, not the company’s financial health. It may be high even if the company’s earnings are low.Assets Includes tangible and intangible possessions that have intrinsic or potential value owned by the company.Tangible and intangible assets owned by the company. Provides a clearer picture of the company’s financial stability.Physical and non-physical such as real estate, patents, etc. Displays physical items.RevenueQuantifies the financial profit from sales and operating activities.The income from a company’s operations and sales.Shows a company’s actual earnings from its business activities.Revenue is not always directly correlated to market capitalization.

Market capitalization, trading volume, and market capitalization-to-volume ratio

Category Definition Purpose ImpactMarket Capitalization The total value of an asset, calculated by multiplying its price by its circulating supply. It represents the total market value of a cryptocurrency. It influences the value of the asset and its overall perception in the market.Volume The total amount of an asset traded over a specific period of time, indicating investor activity. It reflects the level of investor participation and interest in the asset. Higher volume is associated with greater liquidity and market activity.Trading volume to market capitalization ratio is an indicator that compares trading volume and market capitalization and indicates the liquidity of the asset. It measures how liquid and tradable the asset is in the market. The higher the ratio, the more liquid and stable the market is, and the lower the ratio, the more liquid. This indicates low volatility and high volatility.

The importance of market capitalization

Market capitalization represents the total dollar value of the shares issued by a company and is a measure that allows you to see at a glance the size of the company and its relative value in the market. Here are some important details about market capitalization:

1. Company size and stability: Market capitalization gives investors a quick way to determine the size of a company. In general, companies with larger market capitalizations are more stable and established. These are more likely to have weathered market challenges and are often considered safer investments.
2. Risks and Growth Potential: Smaller companies with smaller market capitalizations are often considered to have greater growth potential. However, the risks are also higher because they may not have a proven track record or established market presence. Investors can balance their risk and return preferences by choosing companies with different market capitalizations.
3. Dividend: Large companies with large market capitalizations often have the resources to pay dividends on a regular basis. Investors seeking returns on their investments may prefer companies with large market capitalizations and consistent dividend payments.
4. diversification: Investors can diversify their portfolio by investing in companies with different market capitalizations. This approach can reduce overall risk by blending stability and growth potential.

Factors affecting cryptocurrency market capitalization

Cryptocurrency market capitalization reflects the overall dollar value based on issued coins. But it is more than just a product of price and supply.

Factors such as supply and demand dynamics, industry trends, financial performance, effective management, and unique token supply mechanisms collectively influence it. Here are some examples of factors that influence cryptocurrency market capitalization:

1. Industry trends: The performance of the broader industry or sector a cryptocurrency operates in can have a significant impact on its market capitalization. During periods of robust industry growth, optimism about the company’s future prospects may lead investors to pay a premium for the token.
2. Market situation: The overall picture of the broader financial markets plays a significant role in shaping cryptocurrency market capitalization. In a bull market, investors may be willing to purchase cryptocurrencies at higher valuations, but in a bear market, caution may prevail and lower prices may be demanded.
3. Token Supply: Token supply is an important factor affecting cryptocurrency prices. When token supply is limited, prices tend to rise.
4. node number: The number of nodes serves as an indicator that reflects the number of active wallets within a particular network. Increasing the number of nodes means that the community is thriving and resilient, while conversely, decreasing the number of nodes means that the community is lacking.

Meaning of cryptocurrency market capitalization

The market capitalization of the cryptocurrency market has important implications for investors.

1. Volatility: Investment risk is closely related to price fluctuations. Large-cap cryptocurrencies have lower volatility, making them more stable during turbulent market conditions. Mid-cap coins are more volatile, while small-cap tokens can fluctuate in price significantly, increasing risk.
2. liquidity: Determines how easily an asset can be bought and sold without affecting its price. Large-cap cryptocurrencies are generally highly liquid due to high demand, making trading smooth. On the other hand, mid-cap and small-cap tokens have lower liquidity, which can make trading complicated.
3. Growth Potential: Large-cap cryptocurrency coins have lower growth potential than mid-cap and small-cap stocks. Large-cap coins are a stable choice for long-term investors with low risk tolerance.

Market capitalization in investment, financial analysis

Cryptocurrencies are classified into three main groups based on market capitalization: small cap, mid cap, and large cap..

When evaluating cryptocurrency assets with varying market capitalizations, the length of the investment horizon plays an important role in risk management. The longer the time period, the more opportunity the portfolio has to recover from volatility.

Conversely, investors seeking low risk may prefer to anchor their portfolios in less volatile large-cap and large-cap assets and lower their exposure to small- and mid-cap stocks.

Market capitalization in financial decision making

In financial analysis, market capitalization is used as a key indicator for more than just the price of a cryptocurrency. Market capitalization helps you assess whether an asset is stable, liquid, worth investing in, and profitable. It also indicates the growth potential and relative safety of a cryptocurrency compared to other cryptocurrencies.

In general, it is important to analyze the market capitalization of cryptocurrency, but It is important to integrate indicators such as volume, supply dynamics and other relevant indicators to arrive at a holistic and accurate valuation.

Frequently Asked Questions/Answers

What is market capitalization and why is it important?

Market capitalization reflects the value of a company based on the number of shares it has issued and the price at which investors are willing to buy its shares. In cryptocurrency, it measures the currency price of the asset and the supply of coins in circulation. Market capitalization is important because it provides a quick estimate of the market’s perception of an asset’s value. Market capitalization helps investors evaluate the size, risk, and growth potential of a company or cryptocurrency.

What is the market capitalization formula?

The market capitalization formula is a simple calculation used to determine the total value of a company or cryptocurrency. In the stock market, it is calculated by multiplying the number of issued shares by the current stock price, and is expressed as ‘stock market capitalization = number of issued shares x stock price’.

What is the difference between market share and market capitalization?

Market share provides insight into a company’s competitiveness and dominance in its industry. On the other hand, market capitalization reflects investor confidence and corporate stability in the financial markets.

Is a high market capitalization good or bad?

A high market capitalization can indicate a company with a strong presence in its industry. However, it may mean that the stock is overvalued, so investors should evaluate other indicators and market conditions before making a decision.

Is market capitalization a good indicator?

Market capitalization can be a good indicator of a company’s size and risk, but it should be used in conjunction with other financial indicators for a comprehensive analysis. By comparing the market capitalization of several companies, investors can get a relative idea of ​​the size and importance of a company in its industry.

Is it good for a cryptocurrency to have a high market capitalization?

In the cryptocurrency industry, a high market capitalization is often seen as a positive sign of widespread adoption and investor confidence, but it is not the only factor to consider when assessing a cryptocurrency’s potential. In addition to market capitalization, it is also important to look at factors such as trading volume, technological advancements, and regulatory environment to gauge the overall health and future prospects of a cryptocurrency.

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