📝 Definition:
Market cap, short for market capitalization, is a way to measure the total value of a cryptocurrency.
To find how much a cryptocurrency is worth, you multiply the price of 1 coin by the total of coins that exist for this crypto.
🔑 Key Features:
- Total Value: Shows how much the entire cryptocurrency is worth.
- Simple Calculation: Market cap = Current price of one coin x Total number of coins.
- Ranking Tool: Helps rank cryptocurrencies by size and popularity.
- Indicator of Size: A bigger market cap often means the cryptocurrency is more popular and widely used.
⚙️ How It Works:
- Find Current Price: Look at how much 1 coin is worth right now.
- Total Supply: Find how many coins exist.
- Multiply: Multiply the price of 1 coin by the total number of coins to get the market cap.
- Compare: Use market cap to compare the size of different cryptocurrencies.
💡 Applications:
- Investment Choices: Helps investors decide which cryptocurrencies to invest in.
- Market Ranking: This shows which cryptocurrencies are the biggest and most popular.
- Risk Check: Helps understand the risk level of investing in a certain cryptocurrency.
- Portfolio Building: It can be a good measure to choose a mix of different cryptocurrencies to invest in.
🔍 Example:
Think of a box of candies.
If each candy is worth $1 and there are 100 candies in the box, the total value (market cap) of the candies is $100.
In the crypto world, if one coin is worth $10 and there are 1 million coins, the market cap is $10 million.