With the knowledge of a cryptocurrency’s market cap, you are able to compare the total value of one crypto with another, allowing you to make better investment decisions. Cryptocurrencies are classified into three categories according to their market cap.
Small-cap: Small-cap cryptocurrencies have a market cap lower than $1 billion and are at the highest risk for fluctuations based on market sentiment.
Mid-cap: Mid-cap cryptos have market caps between $1 billion and $10 billion. Mid-cap cryptocurrencies generally have greater potential upside, but also higher risk.
Large-cap: Large-cap cryptos, like Bitcoin and Ethereum, have a market cap of over $10 billion. These are considered to be the lowest risk investments because they have already proved a positive track record of growth. Also, large caps can withstand higher volumes of investors cashing out without the price being impacted too much.
Knowing what market cap in crypto is and how it can help you determine risk when investing in cryptocurrency is important, especially considering how volatile the current market is.
Always do your own research, even if a certain crypto has a large market cap.