Market Cap - Explained like you are 5!

By Cryptonomist | ELI5 | 4 Apr 2021

Market Cap - short for Market Capitalization - is a term that refers to the total value of all of a particular cryptocurrency in existence.

For example, let’s take a look at Bitcoin as of January 11th, 2021. There are 18,597,506 BTC in existence (FYI: the max there will ever be is 21,000,000). The price of BTC on this date, is $32,302.75. Multiplying the number of BTC in existence by the price of BTC, it is said that the market cap of BTC is $600,750,586,942. This means that all of the BTC in existence on January 11th, 2021 was worth about $600.75 billion.

It is important to pay attention to market caps when assessing the value of a particular cryptocurrency. As a comparison, take a look at the following two imaginary cryptocurrencies:

  • Crypto Asset 1

    • 100 coins in existence

    • Worth $100.00 each

    • Market Cap = 100 coins x $100 = $10,000

  • Crypto Asset 2

    • 40,000 coins in existence

    • Worth $0.50 each

    • Market Cap = 40,000 coins x $0.50 = $20,000

Despite Crypto Asset 2 having what appears to be a cheap price per coin, it actually has a total value that is double what Crypto Asset 1 is worth!

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Cryptocurrency - Explained like you are 5!

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