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Cryptocurrency capitalization

29/05/2018 00:00
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What is cryptocurrency capitalization and why do we need it

Crypto capitalization is something that we all know about, but sometimes do not understand pretty well what it is. Some traders and investors often make mistakes while working with capitalization – mostly because of some features are typical to cryptocurrency only; especially compared to the other markets or goods. So, in our article, we will explain what capitalization really means and its specific traits.

What is the crypto capitalization

Cryptocurrency capitalization is the quantity of all the crypto assets that are currently in circulation on cryptocurrency market.
So, the capitalization is the total value of coins. In most cases, we can see the capitalization of particular cryptocurrency, which is spread all around the world. Below you can see the key differences between the usual capitalization and crypto capitalization:

  • For the usual capitalization, we check the value of all the stock assets that are currently on the stock exchanges.
  • For the crypto capitalization, we will count all the issued coins, even if some of them are lost or saved on offline wallets.

The capitalization of cryptocurrency is growing all the time – mostly because of the influence of players from Asia, particularly China. Many market players of this country withdraw their funds and convert them into cryptocurrency. Such things happen due to the official ban, according to which businessmen can’t keep their savings in dollars. Thus, traders began to turn the traditional money into Ethereum and Bitcoin, thereby making cryptocurrency stronger and increasing market capitalization in whole.
It is easier to show all the crypto characteristics with US dollar – it is the common equivalent of cryptocurrencies capitalization. You can check the capitalization on the Internet – the data is updated in real-time mode, so the investors and traders can easily consider any cryptocurrency as a potential working tool.

Differences and features of cryptocurrency capitalization

Unlike fiat money or world company shares, cryptocurrency has its own specific characteristics according to which the capitalization forms. See the main ones:

  • Cryptocurrency itself – the value of cryptocurrency is not connected to any physical things or currencies or other indicators (you can read about this later).
  • The rate and capitalization are interconnected but different in their sense. The cryptocurrency exchange rate influences the capitalization the higher the price of cryptocurrency the bigger the amount of capitalization is.

A lot of experts on the cryptomarket can say that it is hard to make accurate estimations of cryptocurrency common value. That happens due to the loss of the large part of cryptocurrencies (for example, lost wallets access or forgotten passwords, as well as broken computers and hard drives.

Crypto market capitalization rating

The cryptocurrency capitalization is a real phenomenon that can be affected by the various factors. Below you can see a small table of TOP 10 cryptocurrency capitalizations (for the moment of article posting).

#NameMarket capitalizationCoins circulation amount
1Bitcoin$140,468,913,85117,048,150 BTC
2 Ethereum $68,614,711,486 99,593,599 ETH
3 Ripple $26,295,567,319 39,189,968,239 XRP
4 Bitcoin Cash
 $20,121,505,756 17,141,463 BCH
5 EOS $11,223,820,709 872,640,956 EOS
6 Litecoin $7,517,286,881  56,644,038 LTC
7 Cardano $6,205,825,823 25,927,070,538 ADA
8 Stellar $5,825,622,607 18,577,491,293 XLM
9 TRON $5,214,528,758 65,748,111,645 TRX
10 IOTA $4,719,447,853 2,779,530,283 MIOTA

If you read this article shortly after the publication time, you can check the data, the time when you read and you might see significant differences. That happens because of the dynamics of cryptocurrency market, affecting the capitalization. Below you will find the TOP-3 services where you can check the market capitalization of each cryptocurrency:

1. Coinmarketcap - here you can check the data online.
2. Cryptocompare - similar, but less popular online service.
3. Coincap - a site for checking the capitalization level, exchange rate, and crypto volume.
The capitalization can be easily calculated and you can make it on your own. Remember to take the average rate of chosen cryptocurrency and multiply with the number of its’ coins now in circulation. It is more useful to choose this method, because the online services usually take into account the entire amount of generated cryptocurrency, but not that is actually in circulation at the moment. As we noticed, some of the crypto coins were lost, as, for example, some Bitcoins rested on broken devices, lost wallets or with Satoshi Nakamoto, who had saved 1,000,000 BTC at the very beginning of this cryptocurrency. Bitcoin's losses are equated to 3-5 million crypto coins by average calculation.

What affects the capitalization

The rate and the total volume of the currency in circulation are the main factors that have a large impact on the cryptocurrency capitalization. For instance, the number of Bitcoins constantly increases as the miners extract new coins. But there are the cryptocurrencies with primary emission (it is when all coins are issued in one day and then it is impossible to use mining). Then the total volume will not change, and the cryptocurrency capitalization will be influenced by its rate and market activity.

In addition, the demand also affects the cryptocurrency capitalization, because the capitalization is directly dependent on the value of each coin. So, the formation of the capitalization can additionally be influenced by:

  • Influential players of the market. Some of "giant" traders can also affect the cryptocurrency capitalization. For instance, by selling a very large cryptocurrency amount, such a trader or investor can start a panic among younger and inexperienced traders.
  • Government actions, such as prohibitions, or, on the contrary, cryptocurrency legalization. All this could change the capitalization.
  • New and innovative technologies in blockchain industry. Any innovation may accelerate or slow down the market activity.
  • Cryptocurrency mentioning in various media. The media cover a really wide audience, so the information is spreading really quickly. Thus, any news from the cryptocurrency world can affect and change the capitalization.
  • Analysis from the market professionals and influential specialists. If an influential person expresses his opinion, the audience is listening to that person. This could be such people as Warren Buffett and George Soros.
  • Blocking services, closing of the large exchanges or various prohibitions on cryptocurrency or mining.

Why and who needs the capitalization
We all need to check the capitalization before we start our marketing activity. Below you can find the list of people for whom the capitalization is very important.

  • The investors – for these market players the capitalization has a great importance. The more stable this indicator is, the more profitable and reliable this cryptocurrency will be for investment. For instance, a large number of transactions amounting to several billion USD is required to destabilize the state of Bitcoin. At the same time, several actions of ordinary users will be enough for altcoin capitalization change.
  • The traders – the cryptocurrency capitalization monitoring is important both for traders and the investors. With the rate and capitalization, traders can determine the future direction of the price trend, and so decide to purchase or sell the cryptocurrency.
  • People who store money in cryptocurrency – if you decide to save your funds with cryptocurrency, the capitalization will help to understand if it is worth doing. Additionally, by monitoring changes and the cryptocurrency capitalization, you can determine whether you can make a profit and have money from such deposit.
  • Miners: current and the future ones. The capitalization will help to see the cost of the mining, profitability and calculated profit. All this can affect the selection of cryptocurrency to mine.

What is more important: the price or capitalization

PriceCapitalization
It helps traders and investors to understand current cryptocurrency demand better. But you have to be careful – very often the price change depends on pumps from the large market players, but not on real factors. High price confirms good demand.The capitalization clears cryptocurrency position on the market and in relation to other coins. If the cryptocurrency is represented by a large number of coins, then it has more potential users.
The price of cryptocurrency can also show the demand for it but does not guarantee its stability.The good capitalization guarantees greater stability.
This parameter is not always accurate, so often the currency could be attacked by pumpers or dumpers and this will affect the cryptocurrency valueThe lost coins, which are impossible to measure affect the objective data of the capitalization as well.

Both parameters are equally important, but they are equally unstable too. It is much better for the traders and investors to begin with both factors at a time, by simultaneously drawing attention to the analysis of more experienced professionals.

Summary

The capitalization has a great importance for the traders and investors. It helps them to make trade/investment decisions and to work with cryptocurrency more consciously.

Additionally, the capitalization helps people to understand the cryptocurrency popularity level and decide about its usage as a trading instrument.
That is why the beginner traders and investors should focus on the capitalization indicator when choosing cryptocurrency to work with, as:
A coin with a good capitalization is more stable and resistant to minor changes on the market.
You can’t expect a sudden or too sharp price jumps from a coin with a good capitalization.
The rate of such cryptocurrency is stable on average. It won’t change very frequently.
It is important to pay attention to both the capitalization and the rate during the day.
Consider all the factors described in this article to provide more comfortable work. So you can see the cryptocurrency market more clear and provide the successful investments and profitable trading.

The world of cryptocurrency is constantly developing and brings something new, so stay with us and remember to subscribe to our pages in FacebookTelegram  news feed channel and YouTube  channel to stay in touch about all updates of cryptocurrency world!

 

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