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What is the market capitalization of a cryptocurrency?

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The call market capitalization of a cryptocurrency it is a purely theoretical datum.

From a strictly technical point of view, it is merely the product of the price of individual units (the tokens) for the total number of units in circulation.

The total number of tokens in circulation is called the circulating supply and corresponds to the number of tokens created and issued, that is, net of all tokens already created but not yet usable.

For example, right now there are just under 18.5 million bitcoin in circulation, corresponding to the circulating supply of BTC. When it comes to Bitcoin, all created BTCs can be used as soon as they are created, therefore the circulating supply corresponds to the total supply.

However, it is already known that a maximum of 21 million will be created, therefore, the maximum supply is 21 million.

Given that the price of a single BTC is currently around $ 9,100, bitcoin's market cap is approximately $ 170 billion and is obtained by multiplying the circulating supply of approximately 18.5 million BTC by the price of $ 9,100 / BTC.

The calculation is a bit more complex for those cryptocurrencies for which all the tokens have already been issued, but a part is not yet usable.

For example, all of the roughly 100 billion XRP tokens have already been issued, but only about 44 billion have been released.

So multiply the circulating supply of XRPThat is, 44 billion XRP, for the price of approximately $ 0.19 / XRP of a single token gives a market capitalization of just over $ 8.5 billion.

What is the purpose of calculating market capitalization?

First, it should be said that the calculation is purely theoretical, because in the hypothetical case that someone decides to sell all BTC or XRP in exchange for US dollars, it is practically impossible for them to obtain a dollar amount equal to the market capitalization of Bitcoin or Ripple.

After all, putting large amounts of tokens up for sale would cause their price to drop, and no one can determine how much the price could fall.

However, while it is purely theoretical, it is useful to make comparisons, especially between different cryptocurrencies.

In the end, even the market capitalization of publicly traded companies is calculated the same way and has the same limits, but at least allows for comparisons.

For example, Ethereum's market cap It is approximately 26 billion dollars, so we can say that the existing BTC in circulation as a whole are worth approximately 6 and a half times the circulating ETH.

In turn, the total supply of ETH is worth approximately 3 times that of XRP, and that of XRP is more than double that of BCH.

Given that the Bitcoin Cash market capitalization It is just over $ 4.1 billion, we can say that Bitcoin as a whole is worth more than 41 times Bitcoin Cash.

The only real use of this theoretical data from the so-called market capitalization is Make comparisons, not only between different cryptocurrencies but also between a cryptocurrency and, for example, a share.

For example, the market capitalization of Tesla It is approximately $ 279 billion, which is slightly more than the $ 270 billion capitalization of all cryptocurrencies combined.

Another type of comparison can be made between the changes over time in the market capitalization of a single cryptocurrency, or even better, the total market capitalization of all cryptocurrencies.

For example, in 2015, when Ethereum was created, the total market capitalization of the entire crypto market was approximately $ 4 billion, then increased to $ 10 billion in 2016, and then skyrocketed to more than $ 800 billion during the speculative bubble. at the end of 2017.

By the end of 2018, it had returned to around 100 billion, while by mid-2019 it had risen to more than 350 billion.

Since then, it fell below 200 billion in late 2019, then rose to more than 300 billion in February 2020, collapsed to 140 billion in mid-March, and then increased to about 270 billion today.



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