{"id":665,"date":"2021-07-15T14:30:13","date_gmt":"2021-07-15T14:30:13","guid":{"rendered":"https:\/\/coinrabbit.io\/blog\/?p=665"},"modified":"2025-01-27T15:43:30","modified_gmt":"2025-01-27T15:43:30","slug":"crypto-market-cap-why-learn-it-before-taking-crypto-loan","status":"publish","type":"post","link":"https:\/\/coinrabbit.io\/blog\/crypto-market-cap-why-learn-it-before-taking-crypto-loan\/","title":{"rendered":"Crypto Market Cap. Why Learn It before Taking Crypto Loan?"},"content":{"rendered":"
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Crypto Market Cap is the total value of all coins in one network \u2014 for example, the market cap of Bitcoin is $570 billion, which means all Bitcoins taken together have this price.<\/p>\n\n\n\n

Why is market cap important in cryptocurrency? It is a tool to compare the significance of different cryptocurrencies. The price is not a good indicator here \u2014 for instance, 1 Cardano costs only $1.24 at the time of writing, but it\u2019s the 5th coin by market cap. In the meantime, Filecoin that costs $48.99 is only ranking 24. A coin\u2019s blockchain market cap better reflects the network\u2019s value than the price. <\/p>\n\n\n\n

\"Cardano<\/figure>\n\n\n\n

Also, the market cap allows assessing how a crypto coin performs. If you look at the market cap graph and see that the coin is volatile, it means that putting this asset as collateral for a crypto loan<\/a> might be risky \u2014 you can end up losing your coins. Further, we will explain why, but firstly, let\u2019s see what the crypto coin market cap is. What does cryptocurrency market cap mean?<\/p>\n\n\n\n


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How is the market cap defined? Crypto Market cap explained<\/h2>\n\n\n
Market cap = Circulating Supply * Price of this coin. <\/strong><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Circulating supply is how many coins there are in the market right now. For instance, Bitcoin\u2019s circulating supply at the time of writing is 18,757,062 \u2014 it means that this many Bitcoins exist out there at this moment. In the case of BTC, the circulating supply increases every 10 minutes by 6.25 Bitcoins issued as a reward for mining a block. <\/p>\n\n\n\n

In most cases, a market cap directly correlates with a coin\u2019s price. Let\u2019s go to CoinMarketCap <\/a>to see the Bitcoin cryptocurrency market cap graph:\u00a0

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\"Bitcoin<\/figure>\n<\/div>\n\n\n


And here is its price chart:
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\"Bitcoin<\/figure>\n<\/div>\n\n\n

If a coin\u2019s price is growing, so is its market capitalization \u2014 according to the equation <\/strong><\/p>\n\n\n\n

Market cap <\/strong>= Circulating Supply<\/strong> * Price of this coin<\/strong>.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

But if a coin\u2019s price is low, it doesn\u2019t mean that its market cap is also low: the circulating supply can be very big. For instance, XRP costs $0.7 as of June 2021 compared to Bitcoin\u2019s $35,000, but stands at the 6th position by market cap. This is because its circulating supply exceeds 46 billion coins, while in Bitcoin, there are only 18.7 million coins in circulation.

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Why is market cap important in crypto?<\/h2>\n\n\n

Market cap defines how high a cryptocurrency is ranking among other cryptos. The higher a coin is ranking, the more popular among cryptocurrency users it is. Sometimes, but not always, the market cap shows how strong a coin\u2019s impact on the industry. <\/p>\n\n\n\n

Bitcoin is the Top-1 coin by market capitalization and has always been so. There\u2019s even an indicator showing the ratio of Bitcoin\u2019s market cap to the market cap of all other cryptocurrencies (altcoins) \u2014 Bitcoin dominance.<\/p>\n\n\n\n

Ethereum is the second crypto by market cap. BTC and ETH have shaped the Top-2 for a very long time, while the Top-10 is changing rapidly.

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Why should I learn market cap before getting a crypto loan?<\/h2>\n\n\n

Before taking a crypto loan<\/a>, choose what coin you want to use as collateral. Typically, you would pick a coin that fits the following criteria: <\/p>\n\n\n\n