Biggest Misconception About Crypto Market Cap

What is Crypto Market Cap & how it’s calculated?

Crypto Market Cap(italization) is a method of ranking relative size of a cryptocurrency by multiplying last tradable Price by Circulating supply of a token or a coin.

Market Cap = Price * Circulating Supply

Common Misconception about Crypto Market Cap

Common misconception is that many believe that the market capitalization of a cryptocurrency defines the total ‘cash’ invested into that digital asset, which is utterly wrong and misleads newer investors and traders entering this market space.

As of today the cryptocurrency market cap is roughly hanging around $200,000,000,000 (Billion) — does that mean that there is a total of $200 Billion invested in this market today? Absolutely NOT!

Let’s imagine that Bitcoin is worth $5,000 , multiply that by current circulating supply of 17.7 Million and we get $88.5 Billion total market cap of Bitcoin. Now that does not mean that there is a total of $88.5 Billion ‘cash’ invested into Bitcoin.

Why not?

Well, let’s look into it… As we all know, Bitcoin is a ‘mineable’ digital asset with total coin supply of 21 Million and 17.7 Million circulating supply as of today. Now let’s fast forward several years ahead. We have 18.7 Million circulating supply, times that by our $5,000 Bitcoin and we suddenly get a market cap of $93.5 Billion. So where did the $5 Billion come from…