What is Market Cap cryptocurrency market capitalization explained

The basic concept of market capitalization

Market Cap in Chinese is called 市值, which is an important indicator for measuring the scale and market influence of crypto assets. Simply put, 市值 is the total of a certain token’s price multiplied by its circulating supply, reflecting the overall market value of that coin, similar to the market capitalization concept in the stock market.

Market capitalization classification and investment implications

According to market capitalization, crypto assets are roughly divided into three categories: large-cap coins (over 10 billion USD), mid-cap coins (1 billion to 10 billion USD), and small-cap coins (under 1 billion USD). Large-cap coins generally have smaller fluctuations and are relatively safe, while small-cap coins, despite their large fluctuations, have high potential and are suitable for investors with a higher risk tolerance.

Market capitalization is not an absolute value.

Market capitalization only reflects the overall value of the tokens as given by the market and cannot be equated to the project’s true value. Some projects may create inflated market capitalization through controlling supply or price manipulation, and investors should be cautious of misleading data. It is recommended to also pay attention to the project’s fundamentals, circulation rate, and the context of price fluctuations for a comprehensive assessment.

Conclusion

Market Cap is a useful indicator for assessing the size of the Crypto Assets market, but it should not be used for independent decision-making. Newcomers should learn to use market capitalization as a reference for comparing the size of different projects and make rational judgments by combining it with other indicators, diversifying risks, and conducting thorough research to avoid being misled by superficial numbers.