Market Cap is the total value of a company’s shares in dollars. We say the total asset value of a coin in the case of cryptocurrencies as its Market cap. The Market cap determines how stable a company or coin is. In this article, we’ll discuss about market cap and its formulas
How Market Cap is calculated?
We calculate a company’s Market cap as the product of share price and outstanding shares. Here is the market cap and its formulas
Market cap of company = Share price × Outstanding shares
In the same way, the market cap of a coin is the product of the total number of coins mined and the price of each coin.
Market cap of the coin = Total number of coins × price of each coin
Outstanding Shares:
We say shares other than the shares held in the treasury as outstanding shares.
How Market Cap is used?
Market cap persuades the attention of the investors of a company or coin. More stable companies have larger market cap than those with smaller market cap.
- If the price of coin X is 1$ and the cryptocurrency has 400 coins, then its market cap will be 400$.
- If the price of coins Y is 2$ and Y has 100 coins, then its market cap will be 200$.
- In the above examples, the price of coin Y is greater than X but the total value of coin X is greater, which means X is a more stable coin.
Note: Market cap help to measure the Price-earnings ratio (P/E) of a company.
How does Market Cap fluctuate?
Market Cap fluctuates with the fluctuation of Stock price and outstanding price.
Market Cap helps to determine the total value of cryptocurrencies. You must consider your financial condition to entertain the idea of any investment