Prices alone in the cryptocurrency market can be a deceptive indicator of a project’s true potential and value. Cryptocurrency prices can fluctuate dramatically due to factors such as changes in circulating supply, public enthusiasm, and so on. This is why investors rely on market capitalization to evaluate and rank assets and determine their growth potential. Larger market capitalizations generally indicate more investors, relative stability, and influence in the cryptocurrency space.
Now that you’ve learned everything there is to know about the crypto market cap, let’s look at how you can use it to your advantage to make sound investment decisions.
Classification of Cryptocurrency Market Capitalization
Choose the ones with the highest market cap if you want to invest in a relatively stable cryptocurrency. We can divide the size of the cryptocurrency market cap into three categories:
Cryptocurrencies with a High Market Cap
Large-cap cryptocurrencies are those with a market capitalization of more than USD 10 billion. These are low-risk investments because they have demonstrated long-term growth and higher liquidity. Their prices are also less likely to fluctuate dramatically. BTC, ETH, USDT, BNB, USD Coin, and other cryptocurrencies are examples.
Cryptocurrencies with Mid-Capacity
These are cryptocurrencies with market capitalizations ranging from USD 1 to USD 10 billion. Because of its untapped potential, the medium-cap segment is considered high-risk and high-reward. Polygon (MATIC), Internet Computer (ICP), Axie Infinity (AXS), Stellar Lumen (XLM), VeChain (VET), Dogecoin (DOGE), Shiba Inu (SHIB), and Litecoin are a few examples (LTC).
Cryptocurrencies with a small market capitalization
These are cryptocurrencies with market capitalizations of less than $1 billion USD. While these projects are the most dangerous, they can also be the most rewarding. Some of the most exciting small-cap cryptocurrencies are eCash (XEC), NEO, USDD, Bitcoin Gold (BITG), and Nord Finance (NORD).
Crypto Market Cap Weighted Strategy
A weighted market cap strategy entails investing a proportionate amount in each asset based on its market capitalization. To invest $100 in the two largest cryptocurrencies, Bitcoin and Ethereum, for example, take their total market capitalizations and divide them by the percentages each crypto holds in that total (71% Bitcoin and 29% Ethereum). As a result, you’d put $71 into Bitcoin and $29 into Ethereum.
The cryptocurrency market cap is an important metric that indicates the asset’s market value as well as investors’ trust in the project. A market cap, along with basic parameters like the cryptocurrency’s price,crypto tax India, circulating supply, hashrate, and trading volume, allows you to evaluate the cryptocurrency’s performance before investing.
When weighing the risks of any investment, please consider the total value of cryptocurrencies, market trends, the stability of a cryptocurrency, and your own financial situation. Before interacting with smart contracts, conduct your own research, seek independent advice, and exercise due diligence.
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