What is market capitalisation?
Market capitalisation, often simply referred to as ‘market cap’, is the total value of an asset or company. Market cap is the total number of outstanding shares in a company or asset and the current price per share.
For example, if the shareholders in a company own 1,000 shares at $1 each, the company’s market cap is $1,000.
Bitcoin’s market cap is therefore determined by multiplying the amount of coins in existence by the current value of each coin. If there are currently 20 million Bitcoins in existence, and the price of 1 BTC is $25k, the market cap is $500 billion.
What is the relevance of market cap?
It is generally accepted that the higher the market cap of a particular company or asset, the bigger and more stable the investment. The size and value of a company can therefore inform the level of risk of an investment.
It can also inform your understanding of the potential growth of an asset as it generally corresponds to a company’s stage in its business development.
Investors will traditionally opt to balance their investments by buying shares in assets and companies with a range of market caps to balance potential risk and growth.
How has Bitcoin’s market cap changed over time?
Ten years ago, Bitcoin’s market cap was around $50 million, doubling to $100 million in six months. In 2013, in less than a year, the market cap broke through the $1 billion ceiling.
During the 2021 bull run the market cap breached the $1 trillion barrier for the first time, though it has fluctuated above and below that level since then.