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What Can Cryptocurrency Market Cap Tell About a Token?

What Can Cryptocurrency Market Cap Tell About a Token?

In the crypto industry, it seems that the surprises keep on coming. And considering that cryptocurrencies are extremely volatile, every sudden event can affect the market significantly.

FTX, Terra Luna, Celsius, such major events can only hit crypto investors with lower prices, surprising falls, and a market that is on its way to a bearish period. And this is what happened in 2022. The prices of almost every cryptocurrency fell, the market seemed to go down a slide, and crypto enthusiasts had to reconsider their decisions and adjust their investment plans.

But how do you adjust your investment plan? How can you decide whether a cryptocurrency is trustworthy and worth investing in?

Well, this is what we will talk about in this article. Let’s see what we need to calculate the potential of a cryptocurrency and how the market cap tells us more than we think about a certain coin or token.

Total Supply, Market Dilution, and Cryptocurrency Capitalization

There are many aspects we can check regarding a crypto coin or token. Circulating supply, max supply, total supply, price, trading volume, market cap, fully diluted market cap – all these details can show you how a cryptocurrency performs. However, the cryptocurrency market cap remains the most important metric an investor should check.

The market cap of a cryptocurrency is calculated by multiplying its price by the total number of coins in circulation. Basically, it is similar to companies’ market capitalization we find in stocks, only it is for cryptocurrencies, and it can show how valuable a coin or token is.

The market cap shows crypto enthusiasts the total value of the coins in circulation for a cryptocurrency, and this can help them decide whether the coin or token is worth investing in.

When it comes to other metrics investors can follow in the crypto market, the total supply of a cryptocurrency is also worth considering. The total supply is represented by the total amount of coins and tokens in circulation and those that have been mined but are still locked or reserved.

The total supply of a cryptocurrency is extremely important for crypto enthusiasts, as it can tell much about the demand for a cryptocurrency. Thus, if there are more tokens in existence, this means that there will be a need for a bigger demand in order for the price of a crypto to increase.

The market dilution of a cryptocurrency can tell you how its price may change over time. For instance, if there are plenty of investors who hold that crypto, but they hold a small amount, this may affect the overall evolution of the cryptocurrency. And this can also happen when there are a few crypto holders that bought many coins or tokens of a specific cryptocurrency.

Comparing the Market Cap of Cryptocurrencies

As we mentioned before, the market cap of a cryptocurrency is extremely important when it comes to checking its potential. But is comparing the market cap of cryptocurrencies helpful when you are trying to decide in which crypto to invest?

Comparing the cryptocurrency market cap of crypto A and crypto B can help you decide which option is more profitable. This way, your ROI (Return on Investment) can increase, and you can conduct even more crypto-related activities and not only.

Let’s talk based on an example: comparing ETH and BTC. By comparing the metrics of the 2 coins, we can learn that ETH is 0.43X under BTC, considering that the market cap of ETH is less than half of the market cap of BTC. This, along with other essential crypto metrics, can help you decide which crypto might be more profitable.

The Market Cap and the Growth of a Cryptocurrency

The market cap of a cryptocurrency is extremely important when it comes to the growth of a specific coin or token. And it should not be surprising – after all, the market cap is calculated by multiplying the price by the number of coins in circulation.

For instance, let’s say that crypto X has a pretty low market cap. Would so many investors buy those tokens? Well, not really, as they might believe that the cryptocurrency does not perform that well just yet. However, if crypto Y has a market cap of billions of dollars, investors might decide to invest in crypto Y rather than put their funds in crypto X, as the latter may need some improvements, while the former may be a safer investment.

In Conclusion

The crypto industry is pretty volatile and can easily be affected by major events. And this is why many crypto enthusiasts analyze cryptocurrencies pretty well before building their investment plans.

When trying to decide whether a cryptocurrency is a good investment option and has potential, you can check metrics such as the market cap, the total supply, and the market dilution. Such metrics can tell you how the price of a coin or token can change over time and whether it is profitable enough to use your funds for investing in it.

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