What is cryptocurrency capitalization, the principle of formation

In this article, you will learn what cryptocurrency capitalization is and the principle of its formation, as well as which factors, in fact, affect changes in the indicator.

So, for starters, we answer the question: What is cryptocurrency capitalization? Speaking in a simple and understandable language, then this is the cost of a coin. That is, it is an indicator representing the total price of a coin on the world stage. In the capitalization of cryptocurrencies, the emphasis is on the very number of coins mined, but not on their turnover.

Important: capitalization is the most important parameter for evaluating the value of a coin. It is he who, in part, attracts the attention of investors to the coin. The greater the popularity of cryptocurrency, the less its volatility. And the lower the volatility, the more difficult it is to influence the value of cryptocurrency.

Factors That Affect Cryptocurrency Capitalization

After we figured out what is called capitalization, consider the factors that affect its growth.

There are two main factors:

The first factor is the total number of coins that are in circulation;

The second factor is the rate of these coins.

If we take the well-known Bitcoin as an example, thenits number of coins in circulation continues to grow every day. This is due to the uninterrupted mining of the coin and the growth of capacities aimed at its extraction. There is an opinion that the growth of the hash of the network contributes to the appreciation of this coin. This can be described by a simple principle: the more difficult it is to get cryptocurrency, the higher its rate will be. The higher the demand for the coin, the higher its rate will be, and, accordingly, capitalization itself. However, as we see, this rule has not been applied recently, and while the hashrate sets new highs, the price of Bitcoin is in no hurry to take similar steps.

What affects coin demand

The following factors influence coin demand:

Cryptocurrency media;

the behavior of different traders on well-known exchanges;

new technologies, innovations in the crypto world;

forecasts for the cryptocurrency rate from financiers, traders, etc.

The dynamics of the cryptocurrency capitalization indicator in recent years

At the beginning of 2018, the level of capitalizationrose to "heaven." He reached the $ 830 billion mark. But, unfortunately, this indicator fell very quickly, and as quickly as it grew. Six months later, the capitalization of all coins was only $ 300 billion.

Since reaching maximum levelsthe minimum value was fixed at the beginning of 2019 with an indicator below $ 120 billion. As you can see, this figure is 7 times less than the indicators of the beginning of 2018. At the time of writing, the aggregate capitalization is at $ 230 billion, according to CoinMarketCap.

Why do you need to monitor the level of capitalization

Now you may have a question: why bother with monitoring the level of capitalization? We will give an answer to this question.

Of course, to affect the volatility of Bitcoinhuge funds will have to be spent, which will amount to millions of dollars. But for coins with a low level of capitalization, lower costs are needed. For this reason, coins with low capitalization can suddenly fall several times or vice versa grow. You can earn money on this, buy coins at a low cost, and after increasing its value, sell these coins and get a decent income. Here are live examples: last year, Binance Coin + 127.56%, Bitcoin + 86.78%. But you can not only make money on this. With the help of the capitalization rate, you can determine the demand for a coin in the market, and this is useful information for traders.

What cryptocurrencies are promising for investing

Many experienced traders invest their money.TOP 10. This is the right approach, because such coins have more prospects and chances that they will increase in price, because of which the trader will be able to get a solid profit. As for the less popular coins that were not included in the TOP-10, their success will depend on marketing, the versatility of the product, as well as on favorable offers for its customers, which will cause interest in cryptocurrency. For a coin to get into the TOP-10, it will not be enough just to launch this cryptocurrency and promote it well, because the market is developing smoothly, gradually and many investors have already decided where to invest their funds.

Output

So, capitalization is one of the maincharacteristics of any cryptocurrency. It shows the value of your chosen coin, like an indicator of the "strength" of a cryptocurrency. It is for this characteristic that you can choose an asset for a successful investment. In most cases, it is cryptocurrencies with a low level of capitalization that show a rapid increase in market value. Therefore, you need to closely monitor this important criterion for coin growth, and then you will have a good opportunity to earn on cryptocurrency.