Learning Cryptocurrency with SmartCash, - Market Cap
In this new series of Learning Cryptocurrency with SmartCash, we learn what Market Cap is, and why it is important for the macro level of any cryptocurrency.
First thing, we assume basic knowledge of what a cryptocurrency is, and that Alt's such as SmartCash, are where your interests at least partially if not entirely focused.
Over to the Learning, What is a "Market Cap" short for Market Capitalization.
In simple terms it is the total monetary value which is calculated by taking the circulating supply of say SmartCash, and then timsing it by the Price of SmartCash.
e.g. 205,429,850 * $0.017785 = $3,653,569.88
Data as at 11/8/2017 1:40PM AEST
So what does this mean? well in short if everyone sold all of the SMART at one time the amount of money gained by this sale would be $3,653,569.88.
Now that we have explained what Market Cap is, we need to explain why it is important.
When looking at any currency or financial asset class the market cap represents the total value of that financial instrument.
The most important thing that differs between cryptocurrency in gernal compared with traditional markets, is that the total circulating supply has more influences accting on it.
Mining of SMART adds more "Potential" Market supply, once SMART is sold via exchanges the circulating supply increases, and the converse is true, if all SMART is held and not sold or bought on exchanges then the circulating supply goes down.
Price also responds to Market Volume, but is not entirely influenced by circulating volume.
The price is the most volitile component because it is the price somone or somthing is willing to pay for a given amount of SMART.
There are alot of price stability mechanisms and market volume stabilising methods used by various parties to try to control the Market Cap, but that is beyond the scope of this simple article.
To summarise; total circulating supply of SmartCash times the price equals the Market Cap and the bigger the Market Cap, the greater the Value of SmartCash, and by extension the greater your proportion of that value your Smartcash represents.
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