Market Capitalization

Market capitalization (also known as market cap) is a word used to describe a metric used to assess a cryptocurrency's relative size in the blockchain sector. It is computed by dividing the total number of coins in circulation by the current market value of a specific currency or token. Market Cap = Current Price x Circulating quantity at instance, if a cryptocurrency is now trading at $10.00 per unit and has a circulating quantity of 50,000,000 units, its market capitalization is $500,000,000. It is vital to keep in mind that the market cap is not the same as money inflow, even though it may provide some information about the size and performance of a company or cryptocurrency project. Therefore, it does not reflect the amount of money in the market. It's a frequent fallacy that price directly affects market cap calculation, but in reality, even a tiny change in price can have a big impact on market size. Using the previous illustration, a few million dollars might theoretically push the price of a cryptocurrency from $10.00 to $15.00, increasing the market cap from $500,000,000 to $750,000,000. This does not imply that $250,000,000 worth of new money entered the market, though. Actually, volume and liquidity—two separate but linked concepts—determine the amount of money required to produce such a price increase. Liquidity is essentially the degree to which an asset may be promptly acquired or sold without having a significant impact on the price, as opposed to volume, which refers to the quantity of assets exchanged within a specific time frame. Simply put, because there are numerous orders in the order book and possibly a large volume of orders inside the various price ranges, a high-volume and liquid market cannot be easily manipulated. As a result, the market would be less erratic, making it more difficult for a whale to dramatically affect the price without having a lot of money. In contrast, a low-volume market's narrow order book might be readily breached for a small sum of money, having a substantial impact on the price and market cap.