How can the market cap of a particular coin affect its volatility?

There are thousands of cryptocurrencies today. One way to compare them is to look at their market capitalization—a measure of worth that multiplies the number of coins (or shares of the company that created the coins) outstanding by the current price. In theory, the bigger the market cap, the less volatile the asset.

Market-Cap3

Large cap digital assets typically have lower volatility since the market is well established and the pool of coin ownership is spread among a larger and more diverse group of holders, making it harder to manipulate. This therefore lends itself to lower growth rates, but the tradeoff is greater stability. These digital assets are usually traded on all major exchanges, making them globally accessible.

Conversely, with nano cap digital assets, a smaller group of people controls the coins, and therefore the asset’s value is more prone to larger swings when someone sells off. These are not always available in the larger exchanges, limiting buyers and accessibility. However the limited access and market cap/supply can provide large potential returns.

Using information such as the market cap, supply, and trading trends can help you determine where you should be investing your money or what currency you want to mine.

Sources of data in chart:

https://www.investopedia.com/tech/most-important-cryptocurrencies-other-than-bitcoin/

https://www.investopedia.com/articles/investing/112914/liquidity-bitcoins.asp

https://finance.yahoo.com/news/altcoins-bleed-sell-off-wipes-110011415.html

FAQs

Q: What is cryptocurrency market cap?

A: The market capitalization, or market cap, of a digital asset is determined by multiplying the total coin supply by the current market value of that particular coin.

Q: What is a genesis block?

A: A genesis block is the first block in a blockchain. It is unique on the blockchain, in that it does not reference a previous block.

Q: What is a hard fork?

A: A hard fork occurs when the rules of a digital asset’s blockchain change, creating a separate, backward-incompatible blockchain. This results in two cryptocurrencies, one that follows the old protocol and another that uses the new protocol. Examples include Bitcoin and Bitcoin Cash, and Ethereum and Ethereum Classic.

Market cap

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