Cryptocurrency Market Cap Explained

Understanding Market Cap

Market cap is a fundamental concept in both traditional finance and the cryptocurrency world. In simple terms, it represents the total value of a cryptocurrency in circulation. To understand market cap, we need to break it down into its components and explore its significance.

The formula for market cap is straightforward: multiply the current price of a single coin by the total number of coins in circulation. For example, if a cryptocurrency is trading at $100 and has 1 million coins in circulation, its market cap would be $100 million.

Market Cap = (Current Supply) x (Current Price)

Key Points About Market Cap

• Valuation: It provides a more accurate picture of a cryptocurrency's total value than just looking at its price. A coin priced at $1,000 might seem more valuable than one priced at $1, but if the $1 coin has 1000 times more coins in circulation, they would have the same market cap. You'll tend to notice that beginners think XRP can hit the price of Bitcoin, this is because they have 0 FUCKING CLUE about market cap and what the supply of XRP is. They ONLY consider price, which makes 0 sense.
• Comparison: Market cap allows for fair comparisons between different cryptocurrencies. It's the go-to metric for ranking cryptocurrencies by size. You CAN NOT compared prices of two different coins, prices mean fuck all in the investing world, it's just a number you hope goes up. The real and ONLY magic is in market cap.
• Investment Decisions: Investors often use market cap to assess the potential risk and reward of a cryptocurrency. Generally, larger market cap coins are considered more stable but with less potential for explosive growth, while smaller market cap coins are seen as riskier but with higher growth potential.

Market Categorization

Cryptocurrencies are often categorized based on their market cap. Conventionally, this is what people feel:

• Large cap: Usually over $10 billion
• Mid cap: Between $1 billion and $10 billion
• Small cap: Under $1 billion

But for me, I see it like this:

• Large cap: Over $1 billion
• Mid cap: Between $100 million and $1 billion
• Small cap: Under $100 million
• Micro: Under $1 million

Both makes sense, but I feel mine makes more sense.

Investment Strategy

Ideally in the crypto world, you're looking to get into good coins while they have a small market cap. Often times it's better to get into a good small cap instead of a legendary large cap. The goal is to have your coin go from good small cap to a mid cap or even large cap if you're lucky. You DO NOT invest by price, ever. Get it into your head now and never let go, price means FUCK ALL.

If I told you one coin was $1 and another coin is $3000, I gave you MEANINGLESS information. All that matters is market cap.

Bonus Info: Supply vs Price

When smart investors see a coin with a small SUPPLY, they think "Damn, low supply so it means it has the potential to become a very expensive coin since there won't be enough to meet demand!".

When dumb investors see a coin with a small PRICE, they immediately think "I'll be rich if it hits Bitcoin/Ethereum price". So even when a coin has a HUUUGE market cap, they'll buy more and more because they see that the price is low, which is the case with XRP.