The Market Capitalization

in LeoFinancelast year

the market capitalization of a company or market cap as it's also called basically tells us how much money would be generated by selling all of the company's shares at the current market price in other words you multiply the market price of one share by the number of outstanding shares and there you have it that's the market cap of course the number of shares isn't static for example it goes up if that company issues new shares so as to raise capital okay what about cryptocurrencies well the same principle applies you multiply the market price of one coin by the number of coins in circulation and bam you just calculated that cryptocurrencies market cap just like with stocks the number of coins in circulation isn't static and as new coins are mined it goes up now is the market cap a useful indicator sure but it definitely has its limitations and please understand that it does not tell you how much the company is actually worth realistically speaking if someone who owns 10% of a company's shares decides to instantly sell all of them on the open market the share price would crash and he'd get nowhere near the amount he expected with cryptocurrencies this principle applies even more so as there for the most part a lot less liquid than stocks let's assume John lounges a cryptocurrency called John coin which initially has 10 million coins in circulation unfortunately nobody cares except for his wife who buys one John coin from him at $1000 thereby establishing a market price multiply thousand dollars by the 10 million coins in circulation and you get a market cap of 10 billion dollars for John coin which would of course to be ridiculously unrealistic as a general rule it's safe to say that the less liquid shares or cryptocurrencies are the less relevant at the market cap should be considered