What is Market Cap? (Explain Like I’m 5)
Okay, let’s imagine you’re collecting different types of digital coins, like Pokémon cards. Each coin has a value, just like each Pokémon card has a different value in your collection. Market cap (short for “market capitalization”) is like a way to measure the value of your entire collection.
Market cap = price per token * total number of tokens. So, let’s say the price of one XYZ token is $10,000, and there are a total of 100 XYZ in existence. To find the market cap of XYZ, we multiply ($10,000 * 100), to get a market cap of $1,000,000.
Market cap = price per token * total number of tokens.
Following our Investor Scorecard at Bitcoin Market Journal, we consider projects with a market cap of $100 million or more as of higher potential and projects with $10 million or less as of lower potential for investments.
But remember, market cap is not the only thing to consider. Just because a coin has a high market cap doesn’t mean it will always be valuable. It’s important to do research and understand the coin’s technology, team, and community before investing.
Investor Takeaway
Understanding market cap is important for investors as it helps them evaluate the potential of different crypto assets. By considering projects with a market cap of $100 million or more as having higher potential and projects with $10 million or less as having lower potential, investors can make informed decisions about including quality crypto assets in their well-diversified portfolio. However, it’s crucial to conduct thorough research on the technology, team, and community of the coins before investing, as market cap alone is not a guarantee of long-term value.
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