Understanding Crypto Market – Market Capitalization, Circulating Supply and Volume
Coin Guides is a place for anything that is related to Bitcoin, Blockchain and Cryptocurrency. Since we started Coin Guides we’ve been posting so many tutorials and guides for crypto newbie’s. Also we are trying to improve this site by adding more new features. One feature which we recently implemented is crypto market cap where users can see cryptocurrency live charts while reading our guides and tutorials.
In Cryptocurrency Market Capitalization you can see the top crypto currencies. Price of the currency, its market capitalization, 24 hour trade volume, supply and change in %. Since adding this feature we came to know that most newbie’s found it difficult to understand the Cryptocurrency market. Few of our users suggested us to make a post explaining the crypto market and so here it is. Here we’ll try to explain what does market capitalization, circulating supply and volume mean in Crypto currency.
Market Capitalization, Circulating Supply and Volume
Before getting into trading Crypto currencies you must first understand the significance of market cap, supply and volume. These are the three factors that determines the coins rank and popularity. For better understanding of crypto market values let’s consider this top three crypto currencies as an example.
Values are taken by the time of writing this article. To know the current market trend take a look at crypto market cap.
Bitcoin – BTC
Price: $11,887.10
Market Cap: $200,069,545,325
Circulating Supply: 16,830,812
24 hr Volume: $8,190,710,000
24 hr Change in %: 5.42%
Ethereum – ETH
Price: $1,174.53
Market Cap: $114,232,367,790
Circulating Supply: 97,257,940
24 hr Volume: $3,607,040,000
24 hr Change in %: 9.78%
Ripple – XRP
Price: $1.29
Market Cap: $50,157,117,763
Circulating Supply: 38,739,142,811
24 hr Volume: $802,320,000
24 hr Change in %: 6.29%
Alright! Now let’s get in to explanation of each values and how they are calculated. We’ll start accordingly from price, market cap, circulating supply, volume and change.
What determines the price of the Cryptocurrency and how are they calculated?
As you can see just like each Fiat Currency (USD, EUR) the value of each crypto currency also varies. Markets such as Forex, Commodity and Stock are in no way different to crypto when it comes to determining the value. The price of crypto currencies are driven by two main factors such as supply and Demand. Less the supply more the demand.
If you look at Bitcoin, Ethereum and Ripple there is enormous difference in price, why it is so? As we said supply matters. Bitcoin supply is less compared to Ethereum which is less compared to Ripple. So now you may ask “there are so many alt coins with low supply” why aren’t their prices high? This is when the demand kicks in.
Bitcoin is the very first crypto currency launched in 2009. Since then it has gained too much popularity among the main stream. Take this like Gold, Silver and Diamond. More the popularity, more the Fiat money invested and so the increase in net worth and value.
The Price of a Crypto Currency is the amount of Fiat Money that you’ll need to buy a single coin or crypto token. Price is taken from the average trade price reported by each crypto exchange.
Price = Market Cap / Circulating Supply
What is Market Capitalization?
Market Capitalization is simply the amount of Fiat Money (USD, EUR, GBP etc) invested into a crypto currency. As the market cap number increases the value of the crypto currency raises which means it is gaining more popularity. There are few alt coins which are priced more than Bitcoin but they are not popular. This is why when you want to rank a coin don’t rank based on its price, instead use the Market Capitalization. Market Capitalization is what determines the value of a coin.
From trading perspective that is if you are looking for coins with exponential growth then you must consider market cap that is low with higher trade volume. Smaller market cap coins can easily double than coins with larger market cap. Consider Bitcoin price now which is $11,887 and its market cap is $200,069,545,325. For the Bitcoin price to double the market capitalization has to double which will take more time.
Market Cap = Price x Circulating Supply
Circulating Supply
Circulating supply is the third most important factor (after market cap and volume) which you must considered before investing. In Crypto Currency there are 3 types of supply. Circulating Supply, Total Supply and Max Supply. There are currencies with Infinite supply and there are coins with finite supply (capped supply).
As a newbie you may get confused so we decided to make separate post explaining the difference between Circulating Supply, Total Supply and Max Supply.
Circulating supply is the total number of coins that is currently in circulation which has been released to the public. Supply which is locked (total and max supply) will not affect the value of the coin and so circulating supply is the actual metric for determining the market cap. More the circulating supply less the price of the coin.
Volume – 24 Hour Trading Volume
Volume is the total number of crypto currency that’s been traded in the last 24 hours. 24 hour coin volume is the second most important factor to consider when you are trading alt coins. When there is a pump going to happen for a coin then the first thing that starts showing signal is its Volume. The price follows as the volume of the coin goes up.
If the volume is more then it means then the coin is active and more people started to show interest in buying and selling. It will be easy for you to trade (liquidate the coin) if the volume is more.
%24 hr Change
% 1hour, % 24hour and % 7 day is just a ratio used to determine the profit and loss of a coin within that time period. If this is green then there is a chance for the trade volume to increase.
Hope this guide helped you to understand coin market capitalization, circulating supply and volume. If you are new to crypto currency and would like to learn more we suggest you to go through our crypto dictionary. If you found this guide helpful then please share it so people who are new to this will learn.
