In the blockchain industry, the term market cap crypto (or market capitalization) refers to a metric that measures the relative size of cryptocurrencies. The following formula calculates it:
Market cap = current price x circular supply
For example, if each unit of cryptocurrency trades for $ 10.00 and the circulation supply is equal to 50,000,000 coins, the market cap of that cryptocurrency would be $ 500,000.
Crypto market cap can provide some insight into the size and performance of a cryptocurrency company or project, but it is different from the flow of funds. Therefore, it does not represent how much money is on the market. This is a common misconception because the market cap calculation is directly dependent on price, but in reality, relatively small price differences can significantly impact CryptoMarketcap.
Looking at the previous example, millions of dollars could increase crypto prices by market cap from $ 10.00 to $ 15.00 and market cap from $ 500 million to $ 750 million high. However, this does not mean that there was an inflow of $ 250 million to the market. In fact, the amount of money needed to achieve such a price increase depends on two separate but related concepts: quantity and liquidity.
Volume is related to the number of assets exchanged over time. Still, liquidity is fundamental in the extent to which assets can be bought and sold quickly without significantly affecting the price.
In short, there are many orders on the purchase order, and there can be many orders in different price ranges, so it is not easy to manipulate a large number of liquid markets. This reduces market volatility. In short, whales need a lot of money to manipulate prices significantly.
In contrast, thin purchase orders in the small market can be easily handled for a relatively small amount and significantly impact both price and crypto market cap.