In generally market capitalization means the total market value of a company’s outstanding shares. In the crypto world, there are no shares to value the market capitalization, here Coins or Tokens come to the place of Shares.
But not same as general guidelines to calculate market capital, this common guidance calculated in share market world. But in the cryptocurrencies trading here is one equation to calculate market capital.
Market cap of any coin or token at any given time = Price at any given time × Total number of coins or tokens in supply.
Confused…? don’t worry here in above equation it is generally stated that in the crypto world Market capitalization means the price of coin or token multiplied by a number of coins or tokens in the market.
Then How Coins and Tokens Price are calculated..?
After understanding, equation one question is arises how Bitcoin, Ethereum prices are calculated. Cryptocurrencies price is calculated on the basis of volume metric average price of trading, simply a price that at last Buyer and Seller agree to a transaction of cryptocurrency and price includes not one exchange it includes many so we take an average of all the exchanges trading price, that is called as the price of cryptocurrency.
Then that price is multiplied by existing coin or token is supply, for example, there are 17 million bitcoins in the market and bitcoin price is $9,000 then the market cap is = 9,000 × 17,000,000 then the market cap would be 153 billion.
simply market cap is an average trading price multiplied by coin or token supply available in the market, this is how crypto market capitalization is calculated.