Every young investor knows very well that in order to succeed in his investment strategy, it is necessary to have a good knowledge base on the relationship between Bitcoin’s Market Cap and its financial potential for return and risks.
Because only then will it be possible to further expand your horizons and achieve the long-awaited financial independence – all from the understanding of how one of the most important assets of this new era works: Bitcoin. For this reason, if you have doubts – or even have no idea – what the Bitcoin Market Cap is, now is the time!
We prepared a complete article for you to understand everything about this indicator and its importance for the cryptocurrency market. If you’re curious, then don’t waste time and keep reading! We will give you all the answers you need to invest with security and expertise. Need some tricks? Just read more!
After all, what is Market Cap and why is it so important?
Before proceeding to the central focus of the text, it is necessary to understand what a market cap is, after all, it is he who will say – through calculations – how profitable an asset is or not. Both cryptocurrencies and other economic assets have considerable differences when we talk about their capitalization values.
And with Bitcoin’s Market Cap, it’s no different; Just to give you an idea, Bitcoin is considered by many as a commodity, that is, it makes it extremely different from other currencies in the stock market.
And what does this have to do with market capitalization and cryptocurrencies?
There are a number of technicalities when we talk about the cryptocurrency market – or more specifically, the digital asset market.
And the great thing is that there are a number of cryptocurrencies – such as Bitcoin – that receive hundreds of safe supporters every day to invest in long-term perspectives. And what does that mean?
Bitcoin and cryptocurrency market cap: what is it and how does it work?
Basically, that capitalization estimates need to be in line with monetary expectations. But where does the market cap fit into all this? What is he really?
To understand, it’s simple: for cryptocurrencies, it’s often the market cap (market capitalization) that counts when ranking them, and the same goes for other investments. It is he who defines the relative value of each cryptocurrency on the market and thus makes them different from each other.
And how does the Market Cap work in Investments?
Now you are one step away from understanding how the Bitcoin Market Cap works, after all, you already knew the basis of this whole concept. But to succeed in your investments, you need to use the exact strategies that will help you boost your financial income in the right direction. Let’s understand?
You probably already know the importance of the market cap when predicting the financial risks of cryptocurrencies, to estimate which ones have the potential for appreciation in the market and even when measuring which are the best assets when investing. Understanding the position of a company/asset in the market not only helps to understand its equity value, but also to define which ones will be traded and even in defining strategies that help when betting your best chips.
But did you know that there are some concepts that can be used to categorize some of these assets into different groups? They are Small-cap, Mid-cap and Large-cap.
We will talk about each of these groups later, but keep in mind that the “cap” that comes with its name refers to the term capitalization that has been mentioned so much here, that is, its market value. Check out:
Small-cap refers to those assets that have a low market capitalization, that is, their market value is much lower on the stock exchange. Furthermore, the cryptocurrencies that make up this group often operate between $300 million and $2 billion according to their market cap – which is much lower than other categories such as Mid and Large-cap. However, attention must be paid when making this type of investment, since they have low liquidity and few demands for trading.
In turn, mid-caps refer to those assets that are in a better position than the previous ones, because there is greater capitalization power here. Not only that, these assets receive more trades and also have greater liquidity within the market – also, their risks are considered lower than the small-cap. By the way, as these are digital assets with a greater participation within the Exchange, their stability is also one of the most notable aspects, ensuring that the volatility of their share prices progressively decreases. Its market value varies between 2 and 10 billion dollars.
In the traditional market, the companies that make up this group operate at a value above 10 billion dollars, which inherently makes it a great opportunity for those traders who want to bet on this asset. It is worth remembering that the risks related to their investments are also very low, as they have a positive financial history within the market. Of course, you cannot say that they are excellent options when it comes to valuation, however, they offer good returns and there is not much variation in financial terms.
Bitcoin Market Cap: From Theory to Practice
Without further ado, we are going to teach you how to calculate the Bitcoin Market Cap simply and quickly – in fact, this calculation can also be used to calculate the value of any other cryptocurrency – check it out:
- First get the recent BTC/USD trading price values;
- With the data in hand, now multiply this same value by the number of Bitcoins in circulation, that is, the cryptocurrencies mined so far;
- The result obtained will be the market capitalization data – or in our case, the Bitcoin Market Cap.
Remember: the higher the market cap values of a cryptocurrency, the greater its relevance within stocks. For example, in some periods, such as 2020, Bitcoin Market Cap values surpassed the BRL 262,881,783.112 mark, thus ensuring the best positioning among the various digital assets available.
We can give an example of the use of this metric, as in the following case: imagine that Bitcoin is being traded at USD 28,445.00 and the number of tokens (coins) mined so far is 23,700 million, so the value in circulation would be of USD 674 billion. For this reason, the Market Cap indicator has gained so much relevance in recent years, as it is the best way to measure the classification of assets in the market.