What is Market Cap?

Definition of Market Cap

Market Cap refers to the total value of a company’s or a financial asset’s outstanding shares. It is calculated by multiplying the total number of outstanding shares by the current price per share. The formula for calculating Market Cap is as follows:
Market Cap = Price per Share × Total Number of Outstanding Shares
For example, if a company’s stock price is 1,000 tomans and the company has 1 million outstanding shares, its Market Cap would be 1 billion tomans.

The Importance of Market Cap in Financial Markets

Market Cap is considered one of the key indicators for evaluating the size and relative value of a company or asset in financial markets.
This metric provides important information about a company's position in the market and helps investors better assess the level of risk and potential return of their investment.
Companies and assets with different market caps have unique characteristics that play an important role in determining investment strategies. In the following, these characteristics are examined.

Types of Market Cap and Their Characteristics

Market caps are generally divided into three main categories, each with its own specific features, opportunities, and risks. Understanding the differences among these categories can help investors adopt appropriate strategies for managing their assets.

Large Cap

Companies classified as large cap usually have a value exceeding 10 billion dollars. These companies are often major players in the market and possess high financial stability. Large cap companies typically have a strong performance history, consistent revenues, and experienced management. Due to their large size and broad market presence, these companies are less vulnerable to extreme price volatility. Conservative investors who seek stable returns and lower risk usually prefer investing in such companies. Prominent examples of this group include leading firms in technology, banking, and energy sectors.

Mid Cap

Mid cap companies usually have a value between 2 and 10 billion dollars. These companies are generally in a growth phase and have high potential for value appreciation in the future. Unlike large companies, this group is often in the process of expansion and may target new markets or introduce innovative products. This feature makes investing in mid cap companies potentially more profitable, but at the same time, it carries a higher level of risk. Due to their faster growth and the possibility of sharper price fluctuations, investors with moderate risk tolerance are typically interested in this type of company.

Small Cap

Companies with a market cap of less than 2 billion dollars fall into this category. These companies are usually newly established or in the early stages of their growth. Small cap companies may operate in local markets or aim to gain market share in a specific industry. Due to their smaller size and limited resources, they are generally more vulnerable to economic crises or sudden changes in the market. However, their growth potential is very high, and if successful, they can bring significant profits to investors. Investors with a higher risk tolerance who are looking for substantial returns usually invest in this category.

General Comparison of Market Cap Categories

Companies with large market caps are usually safer and offer more stable returns, while companies with medium and small market caps have greater growth opportunities but also experience higher price volatility and greater risk. The choice between these categories depends on the investor's goals, risk tolerance, and investment horizon. Cautious investors typically seek large cap companies, whereas risk tolerant investors may be more inclined to invest in small and mid cap companies.

Factors Influencing Market Cap

The market cap of an asset or market is affected by various factors, and understanding these elements can help investors analyze market conditions and forecast future trends. The most important factors influencing market cap are as follows:

1. Asset Price

The price of each asset unit, whether in the stock market or the cryptocurrency market, directly impacts the calculation of market cap. An increase or decrease in the price of an asset directly changes its market value. In highly volatile markets such as cryptocurrencies, price fluctuations can have a significant effect on market cap.

2. Circulating Supply

The number of coins or shares in circulation is one of the key factors in calculating market cap. When the circulating supply increases, even if the price remains unchanged, the market cap can grow. On the other hand, a decrease in the number of circulating coins can have the opposite effect. Projects with token burn mechanisms usually reduce their supply and thus influence their market cap accordingly.

3. Market Demand

High demand for an asset leads to an increase in its price and consequently a growth in market cap. Demand can be driven by various factors such as widespread adoption, investment appeal, or strong project performance. Increased investor interest, especially in cryptocurrency projects, can have a notable impact on market cap growth.

4. Economic and Political Conditions

Global economic and political developments can affect the value of financial assets. For example, rising inflation, changes in fiscal policies, and economic sanctions can influence asset prices and, in turn, their market caps. During periods of economic crisis, investors usually turn to safer assets like gold, which can lead to a decline in market cap in other sectors.

5. Project Performance and News

In the cryptocurrency market, news related to a project such as technical updates, business partnerships, or new innovations can significantly impact the asset's price and, subsequently, its market cap. The better a crypto project performs and the more it gains investor trust, the higher its chances of increasing its market cap.

6. Market Competition

Competition among similar projects is another factor that affects market cap. In a market where multiple similar projects compete, the one that performs better can attract more investors and thereby increase its market cap.

7. Adoption and Utility

Assets that have broader real world use and are adopted by companies, organizations, and the public typically enjoy higher market caps. For example, digital currencies like Bitcoin and Ethereum have higher market caps than many other projects due to their widespread use in payments, smart contracts, and investments.

8. Regulations

Changes in government regulations can have a major impact on market cap. For instance, government imposed restrictions or trade bans in certain countries may lead to a decrease in asset values. Conversely, supportive policies and legal transparency can lead to increased demand and market cap growth.

9. Market Sentiment

Investor psychology and overall market sentiment also have a significant impact on market cap. When there is optimism in the market, investors are more inclined to buy, which increases market cap. Conversely, when fear and uncertainty dominate the market, investors tend to sell their assets, leading to a decrease in market cap.

10. Technology and Innovation

In the cryptocurrency market, projects that leverage more advanced technologies and unique innovations generally attract greater attention. Innovative projects that solve technical market problems or offer more efficient solutions have a better chance of price growth and, consequently, an increase in market cap.

The Role of Market Cap in Cryptocurrencies

Market cap in the cryptocurrency market is considered one of the key metrics for evaluating the overall value of a digital asset. This indicator helps investors better understand the level of acceptance, stability, and potential risk of a cryptocurrency.

How Market Cap Is Calculated in Cryptocurrencies

The calculation of market cap in this market is similar to that in stock markets and is obtained by multiplying the current price of each unit of the cryptocurrency by the total number of coins in circulation.
Market Cap Calculation Formula in Cryptocurrencies
Market Cap = Price per Unit × Total Number of Coins in Circulation
For example, if the price of one unit of Bitcoin is 30,000 dollars and the total number of Bitcoins in circulation is 19 million, its market cap would be 570 billion dollars.

Classification of Cryptocurrencies Based on Market Cap

Just like in the stock market, cryptocurrencies are also categorized into three main groups based on their market cap, each with its own distinct characteristics.

Large Cap Cryptocurrencies

Large cap cryptocurrencies typically include well established and reputable projects that dominate a significant portion of the market. Bitcoin and Ethereum are prominent examples of this category. These assets generally have high liquidity and tend to be more stable against extreme market fluctuations. Large cap cryptocurrencies are often a suitable choice for conservative investors seeking lower risk and more consistent returns.

Mid Cap Cryptocurrencies

Cryptocurrencies with mid level market cap are usually in their growth and development phases. These projects have high potential for rapid growth but are still exposed to higher risks compared to larger projects. These assets can be attractive options for investors who are looking for profitable opportunities while accepting a moderate level of risk.

Small Cap Cryptocurrencies

Small cap cryptocurrencies are usually newer and lesser known projects that hold significant growth potential. However, due to lower liquidity and smaller trading volumes, these assets often experience more intense price volatility. Investing in this category of digital assets can be risky, but if the project succeeds, it may result in substantial returns.

The Importance of Total Market Cap in the Cryptocurrency Market

Total market cap is used as a key indicator for understanding the overall state of the cryptocurrency market. This metric helps investors better assess current market conditions and make more informed decisions. An increase in total market cap usually indicates growth and rising investor confidence in the market, while a decrease may signal capital outflow and reduced demand.
Total market cap is also used as a measure to assess the impact of new cryptocurrencies on the market and the level of dominance of leading cryptocurrencies such as Bitcoin and Ethereum.

The Relationship Between Total Market Cap and Market Trends

Total market cap can serve as an indicator for identifying bullish and bearish trends. When total market cap is rising, it is generally considered a sign of market growth and the entry of new investors. Conversely, a decline in total market cap may reflect capital exiting the market and the potential for price decreases.
A sudden increase in total market cap is often associated with boom periods in the market, during which prices rise rapidly. On the other hand, a sudden drop in total market cap may indicate the beginning of a bearish market and widespread selling pressure.

The Difference Between Market Cap and Enterprise Value

Market cap only reflects the value of a company’s outstanding shares and does not take into account other factors such as debt and cash assets. In contrast, Enterprise Value (EV) is a more comprehensive measure that includes not only the value of shares but also the company’s debt and cash holdings. Therefore, for a more accurate assessment of a company’s true value, both metrics should be considered.

How Is Market Cap Effective in Investment Decision Making?

Market cap can help investors shape their investment strategies. For example, conservative investors may focus on large companies with high market caps that offer greater stability and security. In contrast, investors seeking higher returns and more risk exposure may invest in smaller companies with lower market caps.

Top Five Cryptocurrencies by Market Cap

In the cryptocurrency market, market capitalization is an important metric used to determine the size and significance of a digital asset. This indicator is calculated by multiplying the current price of each unit of a cryptocurrency by the total number of circulating units, and understanding it can help investors identify reputable and lower risk assets. Below, the five leading cryptocurrencies by market cap are introduced.

Bitcoin (BTC)

As the first cryptocurrency in the world, Bitcoin has consistently held the top position among digital assets by market cap. Created in 2009 by an anonymous individual or group under the pseudonym Satoshi Nakamoto, Bitcoin holds a unique place in the market due to its limited supply of 21 million units and its role as a store of value. Many investors consider Bitcoin to be digital gold, and in times of economic uncertainty, it is regarded as a safe haven asset.

Ethereum (ETH)

Ethereum is the second largest cryptocurrency by market cap and was launched in 2015 by Vitalik Buterin and his team. This platform revolutionized the blockchain space with its ability to execute smart contracts and decentralized applications (dApps). Many DeFi (Decentralized Finance) projects, NFTs, and decentralized apps are built on the Ethereum network, which has significantly increased its demand and, consequently, its market value.

Tether (USDT)

Tether is known as the most popular stablecoin in the cryptocurrency market and is pegged to the US dollar. This digital asset was created to maintain a stable value equivalent to one US dollar, making it immune to the high volatility often seen in other cryptocurrencies. Tether has become an ideal option for fast transactions and capital transfers in the market. Its price stability and high trading volume have earned it a prominent position in the digital asset ecosystem.

Binance Coin (BNB)

Binance Coin is the native token of the Binance exchange and was initially designed to reduce trading fees on the platform. With the expansion of the Binance ecosystem, the role of this token has grown, and it is now used in various areas such as paying transaction fees, participating in Initial Exchange Offerings (IEOs), and even in everyday payments. The strong performance of Binance and its popularity among users have helped Binance Coin secure a high market capitalization ranking.

Ripple (XRP)

Ripple is another prominent cryptocurrency developed to facilitate international payments. Created by Ripple Labs, this digital asset was designed to enable fast, low cost, and secure transactions between banks and financial institutions. Ripple's unique technology, based on the XRP Ledger distributed ledger system, has made it one of the most important assets in the field of cross border payments.

What Is Total Market Cap?

Total Market Cap refers to the combined market value of all assets within a financial market. This metric is widely used in cryptocurrency markets, stock markets, and other financial sectors to assess the overall value of a market. In the cryptocurrency market, Total Market Cap is an important indicator for understanding the size and general trend of the market and can provide valuable insights into the overall state of the sector.

How Total Market Cap Is Calculated

In the cryptocurrency market, Total Market Cap is obtained by summing the market value of all cryptocurrencies in circulation. The formula for its calculation is as follows:
Total Market Cap = Sum of (Price of Each Cryptocurrency × Total Circulating Supply)
For example, if the price of Bitcoin is $30,000 and the total circulating supply is 19 million units, and the price of Ethereum is $2,000 with a circulating supply of 120 million units, the calculation of the Total Market Cap would be as follows:
Bitcoin Market Cap = 30,000 × 19,000,000 = $570 billion
Ethereum Market Cap = 2,000 × 120,000,000 = $240 billion
Total Market Cap = 570 billion + 240 billion = $810 billion

The Difference Between Total Market Cap and Dominance

While Total Market Cap represents the overall value of all cryptocurrencies in the market, Dominance refers to the percentage share of a specific cryptocurrency, such as Bitcoin, within the total market. For example, if Bitcoin’s market cap makes up 50% of the total market cap, we say Bitcoin's dominance is 50%.
Total Market Cap is usually analyzed alongside the Dominance index to gain a better understanding of how capital is distributed across the market. For instance, if the Total Market Cap is increasing but Bitcoin’s dominance is decreasing, it may indicate that altcoins are growing alongside Bitcoin.

How Does Total Market Cap Affect Investment Strategies?

Total Market Cap helps investors better assess market conditions and adjust their strategies according to the market’s status. During periods of rising Total Market Cap, investors are generally more inclined to enter the market, while during periods of decline, they tend to act more cautiously or may choose to exit the market.
Additionally, comparing Total Market Cap with daily trading volume can help identify market peaks and downturns. When the Total Market Cap rises significantly but trading volume does not show a similar increase, it may indicate the presence of a market bubble.

What Is Gold Market Cap?

Gold market cap refers to the total market value of all the gold that has been mined worldwide. This concept helps investors and analysts understand the size and value of the gold market in comparison to other assets such as stocks, cryptocurrencies, and essential commodities. Understanding this concept is highly important for those active in financial markets, as gold is considered one of the most significant safe haven assets in the world.

How Gold Market Cap Is Calculated

The calculation of gold market cap is done by multiplying the price of each ounce of gold by the total number of ounces of gold that have been mined. This method is similar to the calculation of market cap for other assets.

Gold Market Cap Formula

Gold Market Cap = Price per Ounce × Total Mined Gold
For example, if the price of one ounce of gold is $2,000 and it is estimated that approximately 200,000 tons of gold have been mined globally, the calculation would be as follows:
1 ton of gold = 32,150.7 ounces
200,000 tons × 32,150.7 ounces = 6,430,140,000 ounces
Gold Market Cap = 6,430,140,000 × $2,000 = $12.86 trillion

The Importance of Gold Market Cap in Financial Markets

Gold market cap is a valuable metric for understanding the scale of the precious metals market and comparing it with other major assets. Due to its unique properties, gold has always been recognized as one of the safest assets during economic crises and inflation.
Compared to other assets such as cryptocurrencies and large cap stocks, gold’s market cap is typically much higher. This reflects its significant position in the global economy. Investors often turn to gold as a safe haven in times of economic uncertainty, which is why gold remains a key component of long term investment portfolios.

Comparison of Gold Market Cap with Other Assets

Gold’s market cap is often significantly larger than that of many other financial assets. For instance, while the market cap of Bitcoin, as the largest cryptocurrency in the world, is estimated to be around $1 trillion, the gold market cap ranges between $12 to $13 trillion.
This considerable difference highlights the depth of the gold market and its vital role in global value storage.

Gold Market Cap and Its Impact on Investment

Gold market cap helps investors better understand the liquidity, stability, and security of this asset. Given the vast size of gold’s market cap, its price is less affected by extreme volatility compared to assets with smaller market caps. For this reason, gold is consistently considered a reliable option for preserving value against inflation and economic risks.
Gold market cap serves as a key metric for measuring the overall value of this precious metal in global markets. In addition to providing insights into the size of the gold market, it helps investors make more informed decisions regarding capital allocation. A clear understanding of this concept can play a crucial role in risk management and the formulation of investment strategies.

What Is CoinMarketCap?

CoinMarketCap is one of the most widely used and reputable websites providing information in the field of cryptocurrencies. This website is recognized as a comprehensive source for viewing prices, market capitalization, trading volume, and other data related to digital assets. Traders and investors use this platform to analyze the market and make informed decisions in their trades.

History of CoinMarketCap

The CoinMarketCap website was founded in 2013 by Brandon Chez and quickly became one of the most important information sources in the cryptocurrency space. By offering comprehensive and accurate data, the platform has played a key role in enhancing investor knowledge and contributing to the growth of the crypto market.
In 2020, the Binance exchange acquired CoinMarketCap. This acquisition led to improved website performance and the addition of new features, although it also raised concerns regarding the platform’s informational independence.

Uses of CoinMarketCap

CoinMarketCap is considered a powerful tool for cryptocurrency traders and investors. The most important uses of this website include the following:

1. Viewing Real Time Cryptocurrency Prices

CoinMarketCap provides real time pricing for thousands of cryptocurrencies. This information is collected using data from reputable exchanges and made available to users.

2. Calculating Market Cap

On this website, the market cap of each cryptocurrency is calculated by multiplying its current price by the total number of coins in circulation. This metric helps users evaluate the overall market value of a digital asset and compare it with other cryptocurrencies.

3. Cryptocurrency Rankings

Cryptocurrencies are ranked on CoinMarketCap based on their market cap. This ranking can serve as an important indicator for identifying top and reputable projects in the market.

4. Analyzing Trading Volume

CoinMarketCap provides information about the daily trading volume of each cryptocurrency. This metric reflects the liquidity and activity level in the asset’s market.

5. Listing Reputable Exchanges

CoinMarketCap offers a list of active and reputable exchanges in the cryptocurrency market and publishes information about their trading volume, liquidity, and credibility.

6. Analytical and Educational Tools

This platform provides a collection of analytical tools, price charts, return calculators, and educational sections to enhance users’ knowledge.

How to Use CoinMarketCap

To use the features offered by CoinMarketCap, users can visit the website at coinmarketcap.com On the homepage, a complete list of cryptocurrencies is displayed along with their prices, price changes, market cap, and other important data.
Users can also utilize advanced filtering and search tools to compare and analyze various projects based on their preferred criteria.

Distinctive Features of CoinMarketCap

CoinMarketCap has become one of the most popular information platforms in the cryptocurrency space due to its unique features. One of the key aspects of this platform is its extensive market coverage and the provision of comprehensive data on thousands of cryptocurrencies, allowing users to easily view and analyze details about different projects.
A simple user interface and easy access to analytical data are among the notable features of this website, making it usable for both beginners and professionals alike.
Real time updates with high accuracy are also one of CoinMarketCap’s strengths, enabling investors and traders to access precise and up to date information.
In addition, the platform provides access to daily news and major events in the cryptocurrency market, allowing users to stay informed about the latest market developments and make more informed decisions.
Altogether, these features make CoinMarketCap an essential tool for participants in the cryptocurrency market.

Advantages of CoinMarketCap

Free access to comprehensive market data

Accurate and real time updates

Provision of comparison and analysis tools to support better decision making

Display of top and emerging projects in the cryptocurrency market

Disadvantages of CoinMarketCap

Potential delays in updating certain data during highly volatile market conditions

Heavy reliance on data provided by exchanges, which may occasionally be inconsistent

Concerns about data independence following its acquisition by Binance

CoinMarketCap is one of the most comprehensive and reputable sources of information in the cryptocurrency space, providing accurate data on prices, market capitalization, trading volumes, and many other key metrics to help investors and traders make more informed decisions. With its user-friendly interface and extensive data coverage, this platform has become an essential tool for participants in the crypto market.

What Is the Daily Trading Volume Indicator?

The daily trading volume indicator shows the total number of units of a financial asset that have been traded within a specific time frame (usually one day). This indicator is one of the key tools in technical analysis, used to measure the level of activity and investor interest in an asset. An increase in trading volume is often a sign of rising buying or selling pressure and can help confirm price trends. Analysts use trading volume to identify suitable entry and exit points in financial markets such as stocks, forex, and cryptocurrencies.