Before we analyze the estimated value for any crypto market, it needs to know what is the crypto market capitalization and how to calculate it. Market capitalization, or market cap, is a term used to describe the relative size of a cryptocurrency within the blockchain industry. It is calculated by adding the current market price for a particular token to the total number in circulation.
Market Cap = Current price x Circulating supply
If each unit of cryptocurrency was traded at $50.00 and the total circulating supply equals 100,000,000 coins, then the market capitalization for this crypto would be $5,000,000,000.
The market cap can provide some insight into the size and performance of a company or cryptocurrency projects, but it is not the same thing as money inflow. It does not reflect how much money is available in the market. This is a common misconception, as market cap calculations are directly affected by price. However, small variations in price can have a significant impact on market cap.
Consider the above example. A few million dollars could boost the price of cryptocurrency from $50.00 to $75.00. This would increase the market cap from $5,000,000,000 to $7,500,000,000. This doesn’t necessarily mean that there wasn’t $2,500,000,000 of capital in the market. The amount of money required to create a price increase depends on liquidity and volume, two distinct concepts.
Volume refers to the number of assets that were exchanged in a given period. liquidity is the ability to quickly buy or sell an asset without having an adverse effect on its price.
A liquid, the high-volume market is difficult to manipulate because it has many orders and may have large volumes of orders at different price points. This would lead to a less volatile marketplace, which would mean that a whale would require a lot of money to manipulate the price.
A low-volume market with a small order book could easily be overpassed by spending a little money. This can have a significant impact on the market cap and price.