What is capitalization?
Let's explain in simple language what capitalization is.
The price of one share of a company does not speak of the very value of the corporation. For example, the price of X shares is less than $ 5, but the company itself may be three times more expensive than "Company Y", whose shares are worth $ 600.
To have an idea of the market value of a company, you need to calculate its capitalization. Currency capitalization shows its current value on the stock exchange.
For such a calculation, you need to multiply the current price of shares by their number (Current Price x Quantity = Capitalization). If a corporation trades common and preferred shares, then the total capitalization for each type of securities is calculated first, and then the results are summed up. If shares are traded on several exchanges, then capitalization will be calculated based on the share price on one exchange.
Cryptocurrency capitalization
Despite its tensions, 2020 has hit everyone with the growth rate of cryptocurrency. At the time of February 2020, the capitalization of cryptocurrencies exceeded $ 300,000 billion.
The year 2021 for the cryptocurrency started extremely well - as of January 6, the capitalization of the cryptocurrency market approached $ 1 trillion.
The market value of digital funds has risen sharply against the background of Bitcoin reaching a new all-time high, above $ 35.7 thousand, as well as an increase in the value of altcoins.
Such a sharp jump in the demand for digital currencies is due to the fact that people with an entrepreneurial mindset began to look for ways to stay afloat, or even improve their standard of living. That is why many began to consider cryptocurrency and the blockchain sphere as an alternative way to earn money.
Continuing to follow the statistics of the rising prices of cryptocurrencies, we see that their growth is gaining momentum almost exponentially.
What are the nuances of cryptocurrency capitalization?
To calculate the capitalization of a cryptocurrency, multiply the total number of tokens by the rate of one coin (total number x rate of 1 token = capitalization). This formula is similar to the formula for calculating the capitalization of exchanges.
The capitalization of crypto assets is not always considered objective, since they do not always have value as behind company shares.
The main nuance of cryptocurrency capitalization is that many enterprises try to keep some of the tokens for their needs and release only a part for sale. The DeFi system does not allow one buyer to purchase even half of all coins. After no more than ten percent of tokens are placed on the exchange, the capitalization of crypto money, in most cases, cannot be considered objective.
The cryptocurrency mechanism is designed so that most of the asset will not be listed on the exchange but remains with the investor in the form of a long-term investment.
Remember that trading in financial instruments and/or cryptocurrencies involves high risks. Before deciding on a transaction, you should get information about all your risks.
The Cryptology platform will allow you to trade on the most favorable terms, learn more at Cryptology
Stay updated on the news — join our Telegram channel: @cryptology_community