Cryptocurrencies have proliferated since the first mainstream digital token, Bitcoin, was released in 2009. However, they are more volatile than other types of assets, so the total market value of cryptocurrencies fluctuates. In 2021, the value topped $2.7 trillion but slumped to $1 trillion as of July 2023.
This article will explain the total market capitalization of digital tokens, what it tells you about the market, and list the most valuable tokens to note.
What Is A Cryptocurrency’s Market Capitalization?
It is the total value of the tokens available in public hands at a given time. You calculate it by multiplying the price of a token and the circulating supply. For example, if a token trades for $5 and has 100 units in circulation, its market capitalization would be $500. Market value constantly fluctuates because the price of a token changes every second.
What Does It Tell Investors?
Crypto market cap tells investors about the general market sentiment. A rising value indicates that are investors are bullish on a coin. Alternatively, a dwindling capitalization indicates investors’ bearish outlook on the coin.
If you want to compare different cryptocurrencies, capitalization shows you their true worth, not price. A token can be expensive yet have a low total capitalization. Another token can be cheaper and have a higher capitalization.
What Determines It?
The law of demand and supply is what determines the worth of cryptocurrencies. It states that if the supply of an asset exceeds its demand, the price goes down. Inversely, if the demand exceeds supply, the price goes up.
Other factors affecting the value include
- Liquidity: This refers to the availability of a token to trade on various centralized and decentralized exchanges. The more exchanges a token is listed on, the greater its exposure to investors and, consequently, its value. Tokens with low liquidity will have low prices because of little trading volume.
- Media Exposure: The more popular a coin is in crypto news circles, its price and total value will increase. If a coin suddenly gets popular, the price increases because more traders become interested. Inversely, if a coin gets bad press and its popularity decreases, the price follows because of dwindling trader interest.
Top 5 Cryptocurrencies By Market Cap
Bitcoin was the first mainstream cryptocurrency released in 2009. It is the most popular token and is synonymous with cryptocurrency in the public sphere. It has a total capitalization of nearly $600 billion (as of writing) and a circulating supply of 19 million. The maximum supply is 21 million, so there’s still more to be mined before the supply constraints.
Ethereum was released in 2015 by a team of developers and grew rapidly to become the second-largest token by total capitalization. Its total capitalization is over $200 billion, and the circulating supply is 120 million. Unlike Bitcoin, Ethereum has an infinite supply. People can stake their coins to support the network and earn more as a reward.
Tether is a stablecoin pegged to the U.S. dollar. Its value is pegged to an external fiat currency, so the price doesn’t fluctuate like other tokens. The idea is that you can always redeem one unit of Tether for one dollar at any time. The aggregate value of this token is over $80 billion.
BNB is the native coin of Binance, the world’s largest cryptocurrency exchange. It’s hosted on the Binance Smart Chain (BSC), the native blockchain developed by Binance. It has an aggregate value of nearly $40 billion and a circulating supply of 156 million.
USDC is another stablecoin pegged to the U.S. dollar. This coin is managed by a consortium that includes crypto exchanges Circle and Coinbase and Bitcoin mining firm Bitmain. It has an aggregate capitalization of $27 billion.