Market Cap Explained

Stocks and coins represent ownership of the companies or cryptocurrencies of various sizes. Understanding the relationship between that size and stocks or coins’ growth is crucial for StockBattle entrants seeking to gain more on the platform.

What Is Market Cap?

Market cap – or Market capitalization – is a total dollar market value of a company’s shares. It is calculated by multiplying the total number of a company’s shares by the current price of one share. For example, if a company issues 10 million shares trading at $50 each, it would have a market cap of $500 million.

For cryptocurrencies, market cap is the total value of all the coins that have been mined. It’s calculated in the same way as any company’s market cap – by multiplying the number of coins in circulation by the current market price of a single coin.

Sizing up Caps

Usually, all publicly traded companies are divided into 3 groups based on their size: small-cap (up to $3B, in case of crypto, it’s up to $1B), mid-cap (from $3B to $10B, from $1B to $10B for crypto), and large-cap (more than $10B). These groups correspond to a company’s (or crypto’s) stage in its business development: young companies or emerging industries, the ones experiencing rapid growth, and well-renowned companies within established industries.

Why Does It Matter?

Typically, large-cap assets are considered more stable and have less aggressive growth potential. In turn, midcaps may offer more growth potential within a short period of time. While small-cap companies/cryptos are more vulnerable and susceptible to a downturn, they may also achieve much greater short-term growth. Knowing all that helps entrants select the right combination of assets for their portfolio drafts.

Don’t just passively learn, confirm your knowledge in practice. Draft your portfolio now!

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