Market capitalization refers to the total dollar market value of a company’s outstanding shares of stock. Commonly referred to as “market cap,” it is calculated by multiplying the total number of a company’s outstanding shares by the current market price of one share. As an example, a company with 10 million shares selling for $100 each would have a market cap of $1 billion.
For a cryptocurrency like Bitcoin, market capitalization (or market cap) is the total value of all the coins that have been mined. It’s calculated by multiplying the number of coins in circulation by the current market price of a single coin.
One way to think about market cap is as a rough gauge for how stable an asset is likely to be. (It’s important to note that even Bitcoin, crypto’s biggest market cap, still sees volatility.)
But the same way a bigger ship can safely navigate heavy weather, a cryptocurrency with a much larger market cap is more likely to be a more stable investment than one with a much smaller market cap.
Conversely digital currencies with smaller market caps are more susceptible to the whims of the market – and can see huge gains or dramatic losses in their wake.