If you’re interested in knowing the value of Bitcoin or what its future prospects are, market capitalisation is a good indicator to look at.
What is market cap?
Market cap is most commonly used when assessing companies listed on the stock market. It is one of the best measures of a company’s size.
In a nutshell, market cap refers to the total market value of a company’s outstanding shares of stock. If you take the total number of a company’s outstanding shares and multiply that figure by the stock’s market price, you’ll get its market cap. For example, if a company issues one million shares of stock trading at $50 each, its market capitalisation is $50 million ($50 times 1,000,000 shares).
What is the Bitcoin market cap?
Although Bitcoin is not a company, it still has a market cap. The Bitcoin market cap refers to the total value of all the Bitcoin that has been issued. It can be calculated by multiplying the total number of Bitcoins in circulation by the Bitcoin price.
Where do I find the Bitcoin market cap?
The most popular website to use is CoinMarketCap. It ranks every cryptocurrency by its market cap, as well as its price and volume. CoinMarketCap works out the Bitcoin market cap by multiplying the existing price of the cryptocurrency in US dollars by the current circulating supply. If one Bitcoin is worth $10,000 and there are 17 million Bitcoins in circulation, the market cap is $170bn ($10,000 x 17,000,000 = $170,000,000,000).
At the time of writing, Bitcoin has the largest market cap of all cryptocurrencies because it was the first digital currency to be created and has the most developed infrastructure.
Why is the Bitcoin market cap important?
The Bitcoin market cap provides a good indicator of how investors currently view Bitcoin. If the market cap is increasing, it means Bitcoin is viewed in a favourable light and people are bullish about its future. If the Bitcoin market cap is falling, it suggests people are worried about Bitcoin’s future and are exiting their investments.
The market caps of digital coins in general can provide a pretty good indication of how resistant the coin is to volatility. Those with small market caps tend to be more affected by big news stories or large traders taking a position. If lots of large traders sell at the same time, a coin with a small market cap can be decimated.
Bitcoin market cap history
The Bitcoin market cap increased from approximately $1.02bn in the first quarter of 2013 to approximately $72.37bn in the first quarter of 2019, according to data from Statista.
Bitcoin’s roller-coaster ride has been reflected in the overall crypto market. On January 7, 2018, the market cap of the entire cryptocurrency market hit an all-time high of $835.69bn. But one month later, the value of the cryptocurrency market had plunged to $278.53bn, marking a more than $557.1bn drop since the record high, according to CNBC.
What affects the Bitcoin market cap?
Investor sentiment towards Bitcoin is affected by a wide range of factors. In February 2018, the crypto sell-off was thought to have been triggered by moves to block crypto by governments around the world.
For instance, India’s Finance Minister Arun Jaitley said the country wanted to “eliminate” the use of digital currencies in criminal activities, while major banks in the US and UK had moved to block people from using credit cards to buy cryptocurrencies.
Keeping on top of the latest news will give you a pretty good idea of what could be in store for Bitcoin’s market cap.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.