Why do we rank on market cap?
At Coinranking, we rank our cryptocurrencies by market cap (market capitalization) because we believe that it's the best way to evaluate cryptocurrencies with the best accuracy.
The rank is the position a cryptocurrency currently gets in the market. Spoiler spoiler: Bitcoin still ranks number one! Ethereum consistently comes in second place. Apart from these two, the other altcoins have fluctuated in rankings over time.
What is market cap?
Market cap, short for market capitalization, is a well-known method to rank cryptocurrencies.
A market cap is calculated by multiplying the circulating supplies by the price of a coin.
The market cap helps to predict the price stability of a cryptocurrency. Even Bitcoin being at the top of the list sees quite a volatility.
💡 Think of the market cap as a vehicle. A larger truck is more likely to be able to withstand bumpy roads than a motorcycle. The same applies to a cryptocurrency with a larger market cap. It is more likely to withstand whims in the market than smaller market cap tokens.
Why is the market cap important?
A market cap determines how stable the price of a token or coin is and helps you make informed investment decisions. Relying solely on price may be misleading as a discounted price does not necessarily translate into a better value.
Example
Coin A
Coin A is worth $3 and has 300,000 coins in circulation; its market cap will be: 3 * 300,000 = $900,000.
Coin B
Coin B is worth $5 and has 50,000 coins in circulation; its market cap will be: 5 * 50,000 = $250,000.
The overall value of Coin A is more than Coin B, even if the price of Coin B is higher than Coin A. And that’s why the market cap is a better indicator than just the price.
What is a high market cap?
High market cap
These are tokens with a market cap of more than ten billion. These are considered lower-risk investments by investors and they usually have a larger amount of liquidity and a good track record of consistent growth. Some tokens within this category include Bitcoin and Ethereum.
Mid-market cap
These are tokens with a market cap of between one to ten billion. These tokens have a certain amount of volatility as well.
Small market cap
These tokens have a market cap of less than a billion and would be considered significantly riskier investments as they can be very volatile in prices. They will also react significantly to market news and sentiments.