Market Capitalization (or “market cap”) refers to the total market value of a company or cryptocurrency. It is calculated by multiplying the current price of a security or coin by its outstanding shares, and can be used as an indicator of a company’s size and strength.
The market capitalization of any cryptocurrency is determined by taking into account all available supply and circulating supply figures for that particular digital asset. The total supply includes all coins in circulation, including locked coins that haven’t been released yet, while circulating supply only takes into account coins currently being traded on exchanges. By combining these two figures you get the market capitalization number which represents how much money has been invested into that particular crypto project.
In simple terms, when looking at various cryptocurrencies, the higher their market capitalizations are relative to others in the same space it generally means investors think those projects have more potential than others with lower valuations—in other words they are considered “better investments” overall due to larger demand from buyers driving up prices over time as well as potentially better fundamentals such as development progress or technology updates/upgrades etc.. Market caps also provide insight into liquidity levels—the bigger the cap usually indicates better liquidity for buyers/sellers since there may be more people trading regularly resulting in less volatility over time compared to smaller projects with lower caps but still good fundamentals otherwise.
Overall, evaluating cryptocurrencies based on their respective market capitalizations gives investors another metric beyond just comparing individual prices movements which can help them make more informed decisions when investing in digital assets.
