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.
Leave an answer