“Market capitalization,” often shortened to “market cap,” is a term used in finance, particularly in the context of stock markets and cryptocurrencies, to describe the total market value of a company’s shares or the total value of a cryptocurrency. It’s calculated by multiplying the current market price of a single share or a single unit of a cryptocurrency by the total number of shares or units in circulation.
For example, if a company has 1 million shares outstanding and the current market price per share is $50, the market cap of the company is 1 million multiplied by $50, which equals $50 million. Similarly, if a cryptocurrency like Bitcoin has 18 million coins in circulation and the current market price per coin is $10,000, its market cap would be 18 million multiplied by $10,000, totaling $180 billion.
Market cap is a crucial metric as it gives investors a quick and easy way to gauge the size of a company or the total value of a cryptocurrency. It helps in comparing the relative size of companies or cryptocurrencies, although it doesn’t directly measure the company’s or asset’s financial health or performance.