In the cryptocurrency industry, we often discuss the market capitalization and ranking of a particular cryptocurrency. However, many investors may not be familiar with market capitalization or how to calculate it. To provide a clear introduction to cryptocurrency market capitalization, this article will explain its definition, how to calculate it, how to classify it, and its significance.
Cryptocurrency market capitalization (Coin Market Cap, abbreviated as CMC) refers to the total value of a cryptocurrency, which is the sum of the values of all circulating tokens. Market capitalization is an important indicator for assessing the scale of a cryptocurrency and is also one of the crucial criteria for investors when it comes to choosing a cryptocurrency. There are many websites where you can check cryptocurrency market capitalization, such as CoinMarketCap.
Cryptocurrency market capitalization is determined by two factors: The price per token and the circulating supply. The price per token represents the current market price of a cryptocurrency. The circulating supply refers to the number of tokens circulating in the market and available for free trading. By combining these two factors, we can calculate the cryptocurrency market capitalization using the following formula: Market Capitalization = Price per token * Circulating supply.
Let's take MX tokens as an example for explanation. The total issuance of MX tokens is 1 billion, with a circulating supply of approximately 99 million. The current price of an MX token is 4.6 USDT. Therefore, the current market capitalization of MX is approximately 455 million USDT. Thus:
MX market capitalization = MX circulating supply x MX price = 99 million x 4.6 USDT = 455 million USDT.
Fully Diluted Market Capitalization (FDMC) refers to the market value when a cryptocurrency's entire token supply is in circulation in the future. Using the example of MX mentioned earlier, MX's FDMC is approximately 4.6 billion USDT.
MX FDMC = MX maximum circulation x MX price = 1 billion x 4.6 USDT = 4.6 billion USDT
FDMC is an important metric as it allows investors to consider the issuance rate of new tokens and evaluate the impact of currency inflation on the token's value. If a cryptocurrency does not have a specified maximum supply (such as Dogecoin), then it will not be possible to calculate the FDMC.
Cryptocurrencies can be classified into the following three categories based on their market capitalization:
Large-cap cryptocurrencies are cryptocurrencies with a market capitalization exceeding 10 billion US dollars. They are characterized by higher security and liquidity and are generally considered the most widely accepted cryptocurrencies in the market. Examples include Bitcoin (BTC) and Ethereum (ETH).
Mid-cap cryptocurrencies are those with a market capitalization ranging from 1 billion to 10 billion US dollars. Compared to large-cap cryptocurrencies, they may exhibit higher volatility, and their consensus mechanisms may need further improvement. Examples include Litecoin (LTC) and Polkadot (DOT).
Small-cap cryptocurrencies have a market capitalization of less than 1 billion US dollars. This category includes innovative and potentially promising cryptocurrencies with significant volatility, which may experience significant price increases or decreases in the short term. Examples include MEXC Token (MX). However, investors should be aware that fraudulent projects might exist among small-cap cryptocurrencies. Investors should exercise due diligence when researching small-cap cryptocurrencies.
Cryptocurrency market capitalization serves two important purposes:
Cryptocurrency market capitalization is a crucial indicator when measuring cryptocurrencies' scale and market influence. Generally, a higher market capitalization indicates greater acceptance and competitive advantage in the market, while a lower market capitalization suggests lower acceptance and lack of competitiveness.
In general, cryptocurrencies with higher market capitalization tend to exhibit stability and reliability, making them less susceptible to price fluctuations. On the other hand, cryptocurrencies with lower market capitalization are more volatile and more easily affected by price changes.
The MEXC platform provides a feature to view token basic information. You can check this in the [Info] section on the spot or futures page.
As shown in the figure below, on the MX token [Spot] trading page, click on [Info], and you can see information such as the token's name, issue time, issue price, max supply, circulating supply, circulating market cap, and related links.
Cryptocurrency market capitalization represents the total value of circulating tokens in the cryptocurrency market and is an important indicator for measuring the scale of cryptocurrencies. It is calculated based on the price per token and the circulating supply. Cryptocurrencies can be categorized into large-cap, mid-cap, and small-cap based on their market capitalization. Market capitalization plays a significant role in assessing the scale and price fluctuations of cryptocurrencies.