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Cryptocurrency market capitalization is a useful metric to learn the monetary value of cryptocurrency a coins market cap is calculated by multiplying the total circulating supply of the coin by its price let's look at a quick example if we published a block Geeks coin and there were 300,000 of them worth $2 each the block Geeks coin would have a market cap of $600,000 but now we're bored of this coin and we release block geeks coin - there are only 50,000 of these coins but they're worth $4 each for a total market cap of $200,000 therefore even though block geeks coin two is worth twice as much as the original block geeks coin it's market cap is lower this illustrates by market cap is a better way to gauge the influence and growth of a coin than price alone if I have one coin worth 1 million dollars that doesn't leave much room for growth nor does it have much utility as a currency but a large community trading and interacting with 500 million coins worth one cent each has the groundwork for something special even if my 1 million dollar coin is worth more individually the network of the lower-priced coin is more valuable one of the key takeaways here is the risk vs. reward factor typically large market cap assets have less room to grow than low market cap ones similarly the large market cap assets will fall less than small ones in other words volatility can often be tied to the size of an assets market cap most times you stand to gain more by investing in a small cap asset but you also stand to lose more this is where the well talked about concept of diversification comes from a share of money can be placed into larger caps less volatile assets while a share of riskier money can be put towards small cap volatile assets this allows for the possibility of gaining from some of the explosive growth that small cap assets can be prone to while sheltering a portion of your investment in the less volatile large cap assets but market cap doesn't quite tell the story even if it can be Illustrated one big problem with market cap and cryptocurrency is that many coins can be locked away effectively out of use entirely we can look at a real world example of this in the number 1 cryptocurrency Bitcoin according to Fortune anywhere from 17 to 23 percent of bitcoins may already be lost forever if you're looking to learn more we have a link to the article in the description so you can see how this would adversely affect the reliability of a coins market cap an asset could look like it's a safe large cap asset when in reality much of that cap is locked away or lost forever this is why it's important to always do your own research and to never base investments on raw numbers presented to you so now you know what market cap is how it can be useful and how it can be misleading finding well researched sourced and reliable information is the most important factor in deciding what to do with your money always make the most informed decision possible for yourself
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