Starting directives to understand market capitalization (market capitalization)

A Beginner's Guide to

Since the popularity of cryptocurrencies continues to grow, understanding market capitalization has become a decisive aspect for all those who want to invest or act in cryptocurrencies. In this guide for beginners, we will give market capitalization, operation of operation, rupture and an example to capture this basic concept.

What is market capitalization?

The market capitalization, generally called market capitalization, represents the total value of the shares in circulation of a company. In other words, market capitalization gives you an idea of ​​the quantity of money collected in exchange for these current actions.

How does market capitalization work?

To understand market capitalization, we examine a simple example. Suppose we have two companies:

  • Company A: actions in circulation = 100 million

  • Company B: actions in circulation = 50 million

If the market price per share of the company A 10 USD and that of companies B 20, our calculation of market capitalization is:

  • Market capitalization (company A) = $ 100,000 x 10 = 1 billion US dollars

  • Market capitalization (company B) = $ 50,000 x 20 = 1.00 billion US dollars

Note how the market capitalization of company A (US $ 1 billion) is significantly higher than that of companies B (1.00 billion US dollars). This shows why market capitalization can be a strong metric when evaluating companies.

Factors that influence market capitalization

Market capitalization is influenced by several factors, in particular:

  • Number of stocks in progress

  • Current market price per share

  • Commercial volume (how often is the stock purchased and sold))

  • Company industry and financial performance

These factors can affect the market capitalization of a company over time. For example, if a company has a low volume of negotiation or high volatility of the course of action, its market capitalization can fluctuate considerably.

Why is it interested in market capitalization?

Understanding market capitalization is of essential importance for all those who invest in cryptocurrencies, or the purchase and sale of stocks on the market. Here is the reason:

* Diversification

: By distributing your investments on various assets, such as cryptocurrencies with lower market catches, you can reduce your commitment to a certain volatility of a certain asset.

* Investment strategies : Knowing the market capitalization of a company can help you choose investments that correspond to your risk tolerance and your investment objectives. For example, if you are looking for stable yields, you may prefer shares with higher market capitalization.

* Comparison of cryptocurrencies : When assessing different cryptocurrencies, you can understand your stock market capitalizations to assess your relative sizes and your potential risks.

Example: how to calculate market capitalization

Suppose we want to buy 1,000 actions from a new cryptocurrency called “Cryptox”. If the current price is USD 0.05 per share, our calculation of the market capitalization of cryptoxes:

  • Number of actions in circulation = 1,000

  • Current market price per share = 0.05 USD

  • Market capitalization (cryptox) = $ 1,000 x 0.05 = $ 50

By understanding market capitalization, you can make more informed decisions on investments in cryptocurrencies or other assets.

Diploma

Stock market capitalization is a fundamental concept in the world of financial markets and cryptocurrencies. With the invention of this concept, beginners can develop a better understanding of the market and make more informed investment decisions. While the cryptocurrency area is developing, it is important to keep these concepts up to date in order to navigate the complex world of investments.

In our next article, we will examine other important aspects of cryptocurrencies such as blockchains, decentralized finances (DEFI) and the future of digital assets. Stay listening!