Despite huge speculations that Bitcoin would lose to the altcoins in the cryptocurrency wars, there seems to be a reverse of what is actually the case. The volatile altcoins have been unable to surpass Bitcoin in value. Let us discuss some of the terms used by real-time cryptocurrency information providers. We would also see how these providers go about computing the values they present. Cryptocurrencies are very volatile in nature. Users need real-time data about each coin at any time to know the position of such coins in the cryptocurrency market. How do they compute these data? Although the processing speed required for information of this kind, makes the use of special algorithms better, it is important to know what the data means in an ordinary sense.
Cryptocurrency websites like coinranking and cryptocompare give users round-the-clock update of this kind. The categories include coin name, the volume of coin, and market capitalization, which is most important to us in this article. Market capitalization is ordinarily a term used in the financial markets to know the actual value of a company. You can think about it this way. Let’s say company A’s stock price is $30 and the stock of another company B is valued at $20. It is very easy to think that company A is bigger than company B. This may really be true in some cases. You can know the actual size of both company’s through simple multiplication. We could assume that A has listed 1,000,000 shares, and B has listed 3,000,000 shares. The market capitalization of $60,000,000 for B and $30,000,000 for B simply tells us that B is twice the size of A.
In the cryptocurrency market, the same principle applies. The only difference is this. Instead of talking about shares as we do in the financial markets, what we talk about here is fiat currency value. If you look at the data presented in any of the websites mentioned earlier, you would see columns created for market capitalization. The presentation might get you confused. This article would take you through how that is calculated. Every existing cryptocurrency has a clearly stated maximum number of coins that would ever exist. As cryptocurrency miners create new blocks, they generate new coins in the process. Bitcoin, for example, would reach 20,000,000btc at which point miners would get their rewards from transaction fees rather than new coins. To know the current amount of bitcoin mined you can check blockchain.info. At the time of writing this article, the market capitalization of bitcoin is $155.29 billion. This is the result of multiplying the 16,843,763 bitcoins in circulation by the market value of one bitcoin about $9,215. Many ranking lists presented about the cryptocurrency market order cryptocurrencies according to market capitalization. Hence, ripple XRP with a fiat currency value of less than $1 comes ahead of more than $1000 worth bitcoin cash.
The major reason for this is that the market capitalization is an actual measure of the size of a cryptocurrency. It offers better insight to investors and traders since they know which coin has a higher level of activity and offers lower risk. You have learned what market capitalization is all about and why it proves a better comparison for cryptocurrencies. Trust you had a wonderful read.