Cryptocurrencies have quickly risen from an idea to a phenomenon within the past decade and have entered into mainstream technology with a significant impact on our lives. With more prominent cryptocurrencies such as Bitcoin and Ethereum being adopted over time, it has become crucial to track some essential parameters that determine their evolution. Cryptocurrency market capitalization, often abbreviated to Market Cap, is one such significant measure that reflects the total market value of all cryptocurrencies.
The concept of market capitalization can be a confusing topic for many people today. This is the reason why investors undervalue or overvalue a particular cryptocurrency and make wrong investments. In this article you can learn both fundamental information about the capitalization market and useful tips for further investments. We will tell you more about what capitalization market means, how to calculate it, and introduce you to the top five cryptocurrencies by capitalization market value.
Table of contents
- Understanding The Cryptocurrency Market Cap
- How Difficult is it to Estimate Capitalization in the Cryptocurrency Market?
- What Does Cryptocurrency Capitalization Affect?
- Link Between Market Capitalization and Cryptocurrency Price
- Best Cryptocurrencies Nowadays by Market Capitalization
- What Does Cryptocurrency Capitalization Market Mean for Investors?
Understanding The Cryptocurrency Market Cap
Cryptocurrency market capitalization (Market Cap) is one of the classic financial options that has been borrowed by the cryptocurrency sphere from the segment of big finance. Actually, it is one of the most important indicators of the stock market, by which investors evaluate the total value of a company’s shares, which allows them to balance their investment portfolios.
Some people often confuse two different concepts – capitalization and liquidity. The Market Cap indicator reflects the aggregate value of assets on all exchanges (including wallets) while liquidity determines it on a particular exchange. Today, the market capitalization of cryptocurrencies is about 2.5 trillion dollars, which is practically the maximum amount for all time.
How Difficult is it to Estimate Capitalization in the Cryptocurrency Market?
In general, market capitalization may well be higher or lower than what is considered to be the currently estimated valuation. The value of stocks depends on many things and is measured practically on a daily basis. In any case, there are physically measurable assets behind the market capitalization of companies, which makes it much easier to make calculations. If we speak about cryptocurrency, a similar case works a little differently here. Generally, the formula for calculating market capitalization looks as follows:
- Coin value x Number of coins in overall circulation
However, it can be quite difficult to accurately determine the market value of all coins of a single cryptocurrency. First of all, this type of currency is devoid of a control center and has no physical value. The second point concerns the fact that almost no one has clear information about the real amount of digital money in circulation. Also, no one knows about the volume of such money that users have.
We should note that in this situation there is only general information about the amount of money in use, but the volume of lost coins is not known exactly. According to official information, there is a claim about the loss of several million Bitcoin coins. Regarding other currencies, the information is even more ambiguous.
What Does Cryptocurrency Capitalization Affect?
Now you already know what cryptocurrency capitalization is and how to calculate it. However, many people still don’t understand what this indicator is for. So, why is the cryptocurrency capitalization market needed and how does it have an impact?
- The level of volatility of the cryptocurrency itself.
- How popular this asset is in the information space.
The first case is characterized by a lower impact on projects of large capitalization value spikes, which usually arise due to the actions of market speculators. Thus, it can be noted that this indicator is evidence of stability in the context of increased volatility of the general market.
As for the information space, here the price of cryptocurrency usually depends on the information factors of large analytical portals. It is they who form statistics on cryptocurrency projects, opening a kind of top cryptocurrency list in front of users. At the same time, it should be noted the trend that the level of cryptocurrency capitalization always determines its recognizability.
Link Between Market Capitalization and Cryptocurrency Price
As it was said above, cryptocurrencies have no physical value at all, that is, only supply and demand can speak about their value. If there is a fact of capitalization growth, we can talk about the growing popularity of digital currency. Increased demand and limited supply in turn leads to an increase in the price of cryptocurrency, because in this case, currency speculators will expect an increase in value in the future.
If the overall capitalization of a cryptocurrency increases, it means that the demand and hype around the asset is increasing. This process occurs constantly until large players enter the market. After they fix their positions, the situation rolls back in the opposite direction. The cost of cryptocurrency begins to actively decline, and small speculators are trying to quickly realize coins, thus causing an even greater drop in the rate.
Best Cryptocurrencies Nowadays by Market Capitalization
Cryptography and blockchain-based currencies have emerged as some of the most rapidly growing forms of currency in the world in the last ten years. There are thousands of digital currencies available in the market. However, which of them is the most popular or valuable based on market capitalization? That is why we have put together a selection of the top 8 best cryptocurrencies based on official market capitalization value.
1. Bitcoin
Obviously, it is necessary to start such a list with the king of cryptocurrencies. Today, the market capitalization of Bitcoin has exceeded the mark of 1 trillion 400 billion dollars. Such an indicator of market capitalization allows this cryptocurrency to take the first place on our list. However, it is worth noting that Bitcoin has experienced many «ups and downs» in recent years. Availability is a crucial factor in keeping Bitcoins’ value since the number is limited, and it is a name brand. Bitcoin is still making up more than 40% of the total market capitalization of all cryptocurrencies.
2. Ethereum
«Always the second» – these are the words to describe the Ethereum cryptocurrency created by Vitaliy Buterin. This is a decentralized platform that allows the creation of decentralized applications based on smart contracts. This architecture forms the infrastructure layer for decentralized finance, or DeFi, as it is also known. Even though the second cryptocurrency is technically better than digital gold, Bitcoin is still more valued by investors. According to official figures, Ethereum has a market capitalization of $458 billion in 2024.
3. Tether
This is one of the first and largest stablecoins. The USDT exchange rate is pegged to the US dollar, which also provides the reserve: new tokens are issued only when the buyers of the stablecoin replenish the fiat reserve of Tether. The current market capitalization is about $112 billion.
4. BNB
BNB is a cryptocurrency that is launched by the most famous exchange in the world, called Binance. Binance Coin was launched on Ethereum as an ERC-20 token but then migrated to Binance’s own Binance Smart Chain (BSC) blockchain, which uses a Proof-of-Stake (PoS) consensus mechanism. BNB was initially created to pay fees on Binance platforms, among other uses. The market capitalization of BNB in 2024 is equivalent to $104 billion.
5. Solana
This is one of the fastest blockchains in existence, capable of processing over 50,000 transactions per second. Along with an actively growing ecosystem of DApps, Solana’s performance has been one of the key growth drivers in recent years. A few of SOL’s capabilities include staking and decentralized finance. Altogether, Solana’s hybrid protocol is still in the early stages compared to other competitors and shows promising possibilities for further development. The market capitalization of Solan is currently $80 billion.
6. USDC
USDC is another stablecoin that has its value tied to the U.S. Dollar, similar to Tether. Maintaining its 1:1 without this volatility grants USDC value for digital commerce and DeFi applications. USD Coin has grown very popular in a short span of time and now holds an MC of almost $32 billion.
7. XRP
Developed by Ripple Labs, XRP is different from Bitcoin in the sense that it aims at a much higher value cross-border institutional payment as against the P2P transactions. Its market capitalization lies in the range of $29 billion.
8. Dogecoin
It has reached the point of being one of the most famous meme coins that have received great boosts from Elon Musk. As of now, prices linger around $0.16. Today’s market capitalization value of Dogecoin is approximately $846 million. While it still seems to be closer to marketing than to true technological advancement at this time, the gains of Dogecoin also show how social media can be used to push people to take up crypto.
What Does Cryptocurrency Capitalization Market Mean for Investors?
The capitalization market is usually characterized by high growth during phases of bull markets or phases where the general prices are rising. Larger cryptocurrencies including Bitcoin may go through even higher price appreciation while new coins are on the rise. During these periods, there are good chances to make large returns on investments required for assets as they go up. It also means higher risks as the market is driven by speculation.
The opposite of a bull market can be defined as a bear market, during which capitalization indicators are characterized by a decline in token prices and demand. The periods pose some biting tests to those willing to invest and expand their investment portfolio. But for those who have a long-term perspective and are prepared to wait for their investments to mature. Bear trends also have a specific benefit in that high-quality assets can be acquired at a fraction of their real worth.
In simple words, when investors are looking for objects to invest in, they scrutinize cryptocurrency and its history. First of all, investors take a look at the market capitalization value of a particular currency. Experts say that coins with the highest market capitalization values are stable.