When engaging with the crypto markets, the terms “price” and “market capitalization” are metrics you’ll see; but what is the difference?
Understanding both is important, as they offer different yet complementary insights into an asset’s value.
What is Crypto Price?
The price of a crypto asset is its current value per unit, often expressed in fiat currencies like USD. If you visit a crypto markets page today, you might see Bitcoin priced at around $101,762.98 or Ethereum at about $3,077.14. This value is readily visible on crypto market trackers, enabling investors to track shifts over time.
Price Effects
Factors like supply and demand, market sentiment, adoption and utility, and macroeconomic trends all influence crypto prices.
Supply and demand play a significant role: Bitcoin, with a capped supply of 21 million, often sees price increases due to high demand and limited availability.
Market sentiment, shaped by news, regulations, and social media trends, may have an impact on crypto prices. Positive institutional adoption news can propel prices upward, while favorable global economic trends, interest rates, and inflation may also indirectly influence crypto prices.
What is Market Capitalization?
Market capitalization, or market cap, measures the total value of a cryptocurrency by multiplying its current price by the circulating supply. For instance, if a crypto asset is valued at $50 per coin/token and has 20 million in circulation, its market cap would be $1 billion. Market cap provides a broader perspective on the scale of a crypto asset by considering both price and the number of available units.
Factors that may influence market cap include price fluctuations and changes in the circulating supply. Market cap rises and falls in tandem with price changes, making it sensitive to the same factors affecting individual coin prices. Market cap can also increase as more coins are mined or decrease if coins are removed from circulation.
Market Cap Categories
Market capitalization is typically categorized into three groups: large-cap, mid-cap, and small-cap.
- Large-cap cryptocurrencies, such as Bitcoin and Ethereum, are generally regarded as “blue chip” investments due to their historical stability and established track records.
- Mid-cap cryptocurrencies, typically ranging between $1 billion and $10 billion in market cap, offer a balance between growth potential and stability.
- Small-cap cryptocurrencies are riskier due to higher volatility but can provide substantial growth opportunities.
Understanding Each Metric
Crypto price and market capitalization are two important yet distinct metrics, each offering unique insights into the cryptocurrency market. While crypto price provides a snapshot of a single unit's value, market capitalization provides a comprehensive view of the total market value of a cryptocurrency. Understanding both metrics helps investors make well-rounded and informed decisions.
To better understand prices and market capitalization for crypto assets, iTrustCapital offers a markets page where investors can check current crypto prices and their market cap. Lately, many investors are beginning to recognize the benefits of buying and selling crypto in a tax-advantaged IRA. Learn more below!
DISCLAIMER
This article is for information purposes only. It does not constitute investment advice in any way. It does not constitute an offer to sell or a solicitation of an offer to buy or sell any cryptocurrency or security or to participate in any investment strategy.
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