Price is just one way to measure a cryptocurrency’s value. Investors use market cap to tell a more complete story and compare value across cryptocurrencies. As a key statistic, it can indicate the growth potential of a cryptocurrency and whether it is safe to buy, compared to others.
To demonstrate, let’s compare the market cap of two fictional cryptocurrencies.
If Cryptocurrency A has 400,000 coins in circulation and each coin is worth $1, it’s market cap is $400,000.
If Cryptocurrency B has 100,000 coins in circulation and each coin is worth $2, it’s market cap is $200,000.
Even though the individual coin price of Cryptocurrency B is higher than Cryptocurrency A, Cryptocurrency A’s overall value is double Cryptocurrency B’s.
Still, it’s also important to note that many cryptocurrencies’ market cap can swing dramatically due to their volatility.