What Is Cryptocurrency Market Capitalization Crypto market capitalization is the total value of a cryptocurrency. Where stock market capitalization is calculated by multiplying share price times shares outstanding, crypto market capitalization is calculated by multiplying the price of the cryptocurrency with the number of coins in circulation.
An investor might choose to divide their investment into these groups for different reasons , so knowing market cap is important. Market cap is often used to refer to how much a company is worth, and this value can be reflected in how risky it is to invest in the company. Large-cap stocks are often less risky, but slower-growing than mid- or small-cap stocks. However, cryptocurrency is new. A weighted market cap strategy can help investors even if they are only investing in Bitcoin and Ethereum, says Jeremy Schneider, the personal finance expert behind Personal Finance Club told us recently.
A weighted market cap strategy means you put a proportional investment into each asset based on market cap. Just allocate how much of a total investment amount you wish to put into each coin based on its proportional market capitalization.
At the very least, this ensures you are putting much smaller amounts in other cryptos, and larger amounts in the relatively safer Bitcoin and Ethereum. The Marijuana Industry Is Booming. Flat Cash Back Vs. I would like to subscribe to the NextAdvisor newsletter. See privacy policy. The investment community uses this figure to determine a company's size, and basically how the stock market is valuing the company.
There are a number of popular valuation ratios that include market capitalization that investors should look at when considering buying a stock. These ratios include:. Generally, large-cap stocks are slower growth and therefore more likely to pay dividends than faster growing, small- or mid-cap stocks. Market capitalization is used to set investor expectations and shape investment strategy. Different types of investment strategies focus on the various market cap groups, and different valuation methods are applied depending on company size.
Very large market caps are usually associated with mature, low-growth companies that pay dividends. Small caps are often growth companies with higher-risk profiles and generally do not pay dividends. Financial Analysis. Tools for Fundamental Analysis. Fundamental Analysis. Stock Markets.
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We and our partners process data to: Actively scan device characteristics for identification. I Accept Show Purposes. Your Money. Footnote 1. The relatively limited resources of small-cap companies may make their stocks more susceptible to a business or economic downturn, and they could also be vulnerable to the intense competition and uncertainties of untried markets.
On the other hand, small-cap stocks may offer significant growth potential to long-term investors who can tolerate volatile stock price swings in the short term.
Footnote 2. A standard method of gauging the performance of an investment is to measure its returns against those of an index representing similar investments. As with stocks, indexes come in all sizes and shapes. The Russell is another prominent index for small-cap stocks.
Footnote 3. Over time, large-cap, midcap, and small-cap stocks have taken turns leading the market as each can be affected differently by market or economic developments.
That's why many investors diversify, maintaining a mix of market caps in their portfolios. When large caps are declining in value, small caps or midcaps may be on the way up and could potentially help compensate for any losses. To build a portfolio with a proper mix of small-cap, midcap, and large-cap stocks, you'll need to evaluate your financial goals, risk tolerance, and time horizon.
A diversified portfolio that contains a variety of market caps may help reduce investment risk in any one area and support the pursuit of your long-term financial goals. Keep in mind, diversification does not eliminate risk or the risk of potential loss. Footnote 1 Stocks of midcap companies pose special risks, including possible illiquidity and greater price volatility than stocks of larger, more established companies.
Footnote 2 Stocks of small-cap companies pose special risks, including possible illiquidity and greater price volatility than stocks of larger, more established companies. It is not possible to invest directly in an index. Past performance is not a guarantee of future results. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions. The opinions and views expressed do not necessarily reflect the opinions and views of Merrill or any of its affiliates.
Any assumptions, opinions and estimates are as of the date of this material and are subject to change without notice. Past performance does not guarantee future results. The information contained in this material does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation, offer or solicitation for the purchase or sale of any security, financial instrument, or strategy.
Before acting on any recommendation in this material, you should consider whether it is in your best interest based on your particular circumstances and, if necessary, seek professional advice. Locations Contact us Schedule an appointment. Asset allocation, diversification, and rebalancing do not ensure a profit or protect against loss in declining markets. Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice.
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