How cryptocurrency market capitalization works

Ethereum’s price has regained momentum in recent days, rising by about two percent. While it may seem like a small move, the surge is enough to once again catch investors’ eyes, fuel speculation, and spark new waves of analysis. Some are even speculating that the cryptocurrency could approach $16,000 in the near future—a figure that until recently would have been considered too pessimistic. But what really drives such swings? It’s often more than just the emotional reactions of traders or social media posts. There’s a mechanism quietly at work in the background that often goes unnoticed: market capitalization. 

If we want to understand why cryptocurrency market values are changing, why Ethereum is growing, and why Bitcoin is still the reference point for the entire market, we must first delve into the logic behind it – the dynamics of market capitalization.

What does market capitalization really mean in cryptocurrencies?

Market capitalization is one of those terms that often appears in the headlines of analyses and commentaries, but no one explains it clearly enough. It is an estimate of the total value of all tokens or coins of a particular cryptocurrency that are in circulation at a given moment. The calculation is simple – you take the current market price of one coin and multiply it by the number of coins available on the market. If a token has a price of 2 euros and there are 5 million of them in circulation, then its market capitalization is 10 million euros.

Zaradi te preproste formule tržna kapitalizacija pogosto deluje kot odraz skupnegnega zaupanja. Če projekt zraste v vrednosti, to ni nujno zato, ker ponuja nekaj revolucionarnega – včasih je to preprosto za čustveni odziv trga, medijski pomik ali viralno objavo, ki premakne stvari. Meme kovanci so idealna študija primera, kako lahko tržna kapitalizacija hitro raste.

Let’s take a look at two interesting examples – Token6900 and Snorter Bot. Token6900 combines internet humor, references, and the culture of online jokes into a coin that acts almost like a digital collective joke. Snorter Bot, on the other hand, goes a step further and offers practical functions in the Telegram environment. In its case, it is a mix of functionality and identity, which makes investors see more potential – which is of course also reflected in its market capitalization.

Da bi bolje razumeli tržno kapitalizacijo,  ni dovolj, da pogledamo zgolj projekte s spletno karizmo. Oglejmo si še Bitcoin – popolno nasprotje po duhu, a odličen za primerjavo. Bitcoin ima strogo omejeno število kovancev – 21 milijonov – od katerih jih je trenutno v obtoku nekaj manj kot 20 milijonov. Ko združiš to omejeno ponudbo z veliko povpraševanjem in visoko ceno na kovanec, dobiš rezultat: tržna kapitalizacija, ki se večkrat giblje okrog bilijona dolarjev.

Why market capitalization really says something

When we look at the world of cryptocurrencies through numbers, one of the first things we come across is market capitalization. In reality, it is not just a statistic, but a very insightful indicator that can reveal a lot about the dynamics of an individual project. It shows how deeply a cryptocurrency is anchored in investor trust, how much money is circulating around it, and what weight it has in the broader market context.

Velikokrat se zgodi, da vlagatelji vidijo kovanec z nizko ceno – morda nekaj centov – in domnevajo, da gre za podcenjeno priložnost. Če ne upoštevamo tržne kapitalizacije, lahko to oceno hitro napačno razumemo.  Cena enega žetona ne pomeni veliko, če jih je v obtoku več milijard. In obratno – tudi dražji kovanci lahko pomenijo bolj dostopno naložbo, če je njihova celotna ponudba omejena.

Changing capitalization: a movement that never stands still

Market capitalization is not something that is written down on paper and stays there. On the contrary, it changes all the time, along with price fluctuations and the inflows or outflows of coins on the market. When the value of a coin increases, this is usually followed by an increase in capitalization. This means that increased investor interest is directly reflected in the perceived size of the project.

Zadnji tedni so denimo prinesli zmerno, a občutno rast cene Ethereuma. Ta 2-odstotni skok je v številkah morda skromen, a na ravni kapitalizacije pomeni premik, ki znova oživi trg, vzbudi nove špekulacije in požene v tek vprašanja o naslednjem valu rasti.

Therefore, it is important to know that market capitalization is not an end result, but a process in motion, where price and volume together write the story of the project.

Types of capitalization: how to recognize where a project stands

Investors often use market capitalization as a starting point for understanding the relationship between risk and opportunity. Depending on how large a project's capitalization is, its behavior is also expected in certain market conditions.

Larger projects are those with a value exceeding $10 billion. These typically offer stability, high liquidity, and a long track record that gives investors a sense of security. 

Mid-cap, i.e. between 1 and 10 billion, opens the door to projects that have already passed the initial growth phase but have not yet reached full maturity. These projects often attract investors looking for a balance between profit potential and manageable risk.

At the other end of the spectrum are projects with low market caps – often new ideas, fresh teams or experimental solutions. In this category, returns can skyrocket quickly, but they can also disappear just as quickly if interest wanes or an unexpected turn of events occurs.

The content of the article is not financial advice or a recommendation to buy/sell cryptocurrencies. All information is provided for educational purposes only. Mention of individual investment instruments, cryptocurrencies, stocks, funds, precious metals, may be included only for the purpose of describing the idea or for educational purposes.