Crypto market capitalization describes the current market value of a given cryptocurrency or blockchain network. It is an important parameter that provides us with a fair idea of a market’s financial strength.
Introduction to Crypto Assets
Much effort is not required to calculate the market capitalization of a given crypto asset. Though many crypto followers prefer to compare the market cap of different individual projects, it is equally helpful to know its value on an industry-wide scale. Presently, Bitcoin and Ethereum are the biggest cryptocurrencies in terms of market capitalization. While this is true, all cryptocurrencies’ total market cap is more significant than their individual ones. Major crypto data aggregators disclose the total market capitalization. We need to know what this data means and what it tells us about the market’s state.
Meaning Of Crypto Market Capitalization
The term "market capitalization" is widely used for traditional securities but is also of significance in analyzing cryptocurrencies. Market capitalization is simply the measure of the value of an asset. When applied to cryptocurrencies, we can define it as a measure of a cryptocurrency network’s value. It can be calculated manually. To calculate the market cap of a given asset, multiply the circulating supply by the price of one unit of the asset.
Here is an illustration. For instance, XCOIN and YCOIN are two networks. XCOIN has a circulating supply of all its 2,000 coins. On the other hand, YCOIN has a circulating supply of 50,000 coins out of a maximum supply of 100,000 coins. If we assume that the market price of XCOIN is $100 and that of YCOIN is $5, which of the two networks has a greater market cap?
The calculation for market capitalization is expressed as MC = CS x Price.
With this, we can calculate the market cap of both networks.
XCOIN Market Cap = 2000 x $100 = $200000
YCOIN Market Cap = 50000 x $5 = $250000
From these calculations, we observe that the YCOIN network’s value is bigger than that of XCOIN, even with a lower unit price. Therefore, a market cap is better used to estimate the value of a token as opposed to the price.
Diluted Crypto Market Capitalization
This is one way of estimating the future value of a particular network. It is a term that is widely used in the stock market. It is a representation of a company's valuation if every stock option is exercised and all securities are converted to stock.
Let us apply the term to the crypto market. For instance, the maximum possible supply of Bitcoin is 21 million, out of which about 18.505 million are in circulation. This corresponds to a market cap of approximately $195.2 billion if we assume $10550 per BTC.
To calculate the diluted market cap, one has to consider the maximum supply of Bitcoin. This means that we will multiply the total supply of Bitcoin by its price. It also helps to determine if an asset is overvalued or undervalued.
DCM (Diluted crypto market cap) = TS (Total Supply) x Price
Understanding Total Crypto Market Capitalization
As the name implies, total crypto market capitalization is the combined total value of all crypto assets on the crypto market, such as Bitcoin, altcoins, stablecoins, tokens, etc. The information about the total market cap is very vital because it discloses the entire industry's size.
There is no doubt that many crypto assets’ value tends to fluctuate due to the crypto market’s volatility. In fact, since the inception of cryptocurrencies, the entire market cap of the industry never breached the $20 billion mark in the first six and a half years. However, in 2018, the market capitalization skyrocketed to $770 billion and is now over 2 trillion.
Significance Of Total Market Capitalization
One primary importance of the total crypto market cap is that it is helpful to compare with other economic sectors. Many enthusiasts often compare the total market caps of cryptocurrencies and other sectors like the stock market and precious metals. They do this because it gives them a fair estimate of the future growth of the crypto market. Even as this estimate is helpful, it is not certain. Therefore, it is still unclear how to determine the potential value of cryptocurrencies or blockchain projects with absolute accuracy.
Closing Thoughts on Market Caps
Crypto market capitalization is an essential metric. It tells the valuation of the whole crypto industry. It can provide a fair comparison between the present valuation of an asset and its value later in the future. Although market cap is a quick means of making projections about any financial industry, other market parameters need to be considered in order to arrive at a holistic assessment of that industry.
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Related News
Prisma Finance Reportedly Hit by $9M Hack: What to Know
Prisma Finance paused its protocol operations for investigation and advised vault owners to disable delegate approval.
Reports have emerged indicating that DeFi platform Prisma Finance, fell victim to a hacking attack amounting to approximately $9 million. Cyvers, a web3 security platform, raised the alert after it detected suspicious transactions linked to the breach.
🚨UPDATE🚨Our system has detected multiple suspicious transactions with @PrismaFi and still ongoing!
— 🚨 Cyvers Alerts 🚨 (@CyversAlerts) March 28, 2024
Total loss so far is around $9M. Attacker has funded by @FixedFloat!
Our system has detected the malicious contract 2 min earlier than hack transactions!👇
Our system would… https://t.co/9myoV8DL22 pic.twitter.com/SxT5yYZy7U
Initial estimates suggest a loss of $9 million, with the attacker reportedly utilizing funds from the crypto exchange FixedFloat.
Backing up Cyvers' findings, blockchain security firm PeckShield has confirmed the attack, providing details on the assets targeted by the hacker. Among the stolen assets are Prisma mkUSD and wrapped stETH.
In response to the breach, Prisma Finance issued a statement on X acknowledging the potential exploit. The project reportedly halted its protocol operations to conduct a thorough investigation into the incident.
Additionally, Prisma Finance advised vault owners to disable delegate approval as a precautionary measure.
We are aware of a possible exploit on Prisma.
— Prisma Finance (@PrismaFi) March 28, 2024
Core engineering contributors will pause the protocol and investigate.
We'll share an update and a post-mortem.
From DeFi Future to Security Concerns
Prisma Finance was initially hailed as the future of decentralized finance (DeFi), offering solutions in the form of a new LSTFi protocol. It enabled users to mint a fully collateralized non-custodial and decentralized stablecoin, mkUSD, using Ethereum liquid staking tokens (LSTs) as collateral.
However, the recent exploit paints a stark contrast to the platform's previous reputation, raising concerns regarding cybersecurity in the DeFi space.
Rising Trends in Crypto Hacks
The hack on Prisma Finance adds to a concerning trend in the cryptocurrency space. According to a Feb. 29 report by blockchain security firm Immunefi, over $200 million worth of cryptocurrency was lost to hacks and rug pulls last February, across 32 individual incidents.
This represents a 15.4% increase compared to the same period in 2023. Ethereum remains the most targeted blockchain, with 12 attacks accounting for over 85% of the total value lost in February.
This is a paid press release, BSC.News does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products, or other materials on this page. The project team has purchased this advertisement article for $1500. Readers should do their own research before taking any actions related to the company. BSC.News is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods, or services mentioned in the press release.
This is a paid press release, BSC.News does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products, or other materials on this page. The project team has purchased this advertisement article for $2500. Readers should do their own research before taking any actions related to the company. BSC.News is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods, or services mentioned in the press release.
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