A Beginner's Guide to Crypto Part 3: Understanding Market Capitalization!

Bit of a short post here, but an important thing that I am glad I learned early!


Market Capitalization/Mcap/Market Cap refers to the total value of a given asset on the market. In the case of equity, it can be calculated through share price * number of publicly traded shares. Similarly with regards to crypto, it is calculated through coin price * coin supply on the market. This metric is often used to compare and even rank different coins, as it is effectively a measure of how much money is in the coin's market. 


The reason why this is a crucial piece of information is because it helps you to question how realistic certain goals/targets are. For example, if someone came up to you and said "Hey! You really ought to buy some $SHIB (Shiba Inu Coin, self-dubbed as 'The Doge Killer'), it's going to be worth 1 cent soon!" Now applying the knowledge about market cap, we know that $SHIB, priced at US$0.000009042 with a total circulation of 394,796.00 Billion coins (aka roughly 3.94x10^14), has a market cap of roughly US$3,549,538,953 (at the time of writing), which is not a small number by any means! However, if someone tried to convince you that it had the potential to reach 1 cent (which, by the way, is a 110,495% increase), they would be claiming that it was capable of having a market cap of almost US$4,000,000,000,000. To put that in perspective, the total size of the world economy is US$80,934,771,028,340, and the current market cap of the entire crypto market is US$1,613,379,143,788. Whether you believe $SHIB is capable of growing to 5% of our entire planet's economy, and 4x greater than the current crypto market itself, i'll leave that up to you...



Believe it or not, I have seen this kind of shilling multiple times in my short time with crypto. So when in doubt, look at the market cap and ask yourself, is this realistic? 



As always, remember to DYOR, and all the best!

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A Beginner's Guide to Crypto
A Beginner's Guide to Crypto

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