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How to calculate cryptocurrency market capitalization

  • market
  • cryptocurrency
  • calculating
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At the beginning of autumn 2018, cryptocurrency market cap total exceeds 200 billion pounds. But it does not mean that if you sell all the coins, then this amount will be earned. To calculate, you must use a complex formula.

How much the cryptocurrency market really costs

If you have ten phones for 100 pounds, you can sell them for 1000 pounds. But cryptocurrency market is arranged according to a different principle. It is more like stock options. That is, the mass sale of securities of one issuer leads to a drop in prices for the remaining.

The reverse situation is observed when buying. Each next lot will cost more than the previous one, provided that there are fewer assets left on the market. That is, the capitalization of the cryptocurrencies in 200 billion does not mean that the exact amount was invested. The first buyer of bitcoin bought it for a few pounds and the last one for several thousand. And capitalization will be considered at the current price, that is, the last one. Although this figure does not reflect reality, it allows solving important tasks of the cryptocurrency market:

  • evaluate the dynamics of value;
  • to study the liquidity and volume of trade operations;
  • To compare different classes of trading assets.

To calculate the total size of bitcoin capitalization, it is necessary to multiply the number of coins already mined by the value of one unit. This is not difficult; these figures are in the public domain. It is more difficult to assess the capacity of the entire market. The matter is that there are already about 2000 cryptocurrencies. That is, such an operation should be carried out two thousand times and then the results should be summarized.

But not all types of digital coins have an active dynamics of value growth. Some of them, for example, Stellar, have a tight binding in the fiat money. Therefore, it is wrong to take them into account in the general mass. Moreover, the capitalization of this coin remains stable for several years.

Why it is important for an investor to know the capitalization of an asset

When placing funds, the investor must understand the behaviour of the trading asset. The more funds are invested in it, the more stable it behaves. A large stone is much more difficult to move than a small one.

In addition, more liquid cryptocurrency is characterized by an increased security guarantee. Bitcoin, which was launched in 2010, is more stable than the situation of the cryptocurrency market one coin, which arose in 2015. Although some projects are immediately demanded by the community, and then their value grows very quickly. The popular Ethereum coin also appeared only in 2015, but it has already won almost 12% of the entire cryptocurrency market.

Features of the digital money market

In the world of the blockchain, there is an obvious leader now, it's bitcoin. It ranks first in capitalization, more than 50%. It is followed by its forks, followed by the Ethereum and Ripple platforms. Only 10 coins received 85% of the capital market.

Hereof it can be concluded that the blockchain is in the development stage and important changes are still possible. Now it is impossible to say that cryptocurrency market capitalization reached a maximum. Despite the constant appearance of new technological solutions, the leaders are not inferior to their positions.

The reason is that bitcoin was one of the few to become an official trading tool. Contracts for the difference in prices are used on many stock exchanges. According to the latest information, in 2018 Ethereum will also become a category of assets for institutional investors.

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