Grassroot Crypto Education (Vol.3) - Crypto Market Capitalization and its Elements: Practical use of Tools to Explore different Cryptocurrencies | 10% Payout to @steemkidss
Introduction
Hello, kids. In the last lesson, we talked about some examples of cryptocurrencies and their ranking. It is important to let you understand what it is meant by ranking by market capitalization in the crypto ecosystem such that you don't assume that ranking of assets is done based on dates of creation. In today's lecture, I will teach you how ranking is done in the crypto ecosystem.
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What is Crypto Market Capitalization?
Market capitalization in the crypto ecosystem refers to the total value of certain crypto assets that have been in existence. In other words, it is used to measure the size of a crypto asset and the value is what is considered for the ranking of the assets available in the world of cryptocurrency. To get the market capitalization of an asset, we would be using the current price of the asset and its circulating supply.
In the previous class, we highlighted that Bitcoin is ranked number 1 by market capitalization, this does not mean that it was ranked at that position because it was the first cryptocurrency ever but its value by market capitalization is the main factor that determines its position. I would explain it better as we progress in this lecture.
How Market Capitalization is Calculated
For the calculation of market capitalization, the current price and circulating supply of the asset would be used as earlier expressed. As such, the product of the two elements above would determine an asset's market capitalization. See the expression below.
Market Capitalization = Current Price * Circulating Supply.
Where;
Current Price = The price the crypto asset is trading at the moment.
Circulating Supply = The amount of the crypto assets that are available for trading at that moment.
In short, the multiplication of the current price of the asset and the circulating supply of the same asset gives birth to the asset's market capitalization value and this determines its rank amongst other cryptocurrencies in the world.
For example, if a crypto asset named Peace Token (PET) is trading at 5 USD and the circulating supply 30,000 PET, applying the formula given above, we have;
PET's Market Capitalization = 5 * 30,000 = 150,000.
From the above, the market capitalization value of PET is 150,000 USD. Note that: PET used in this context is a merely assumed token.
How to Explore a Crypto Tool for an Assets' Ranking
There are several crypto tools to check the information about different crypto assets. For today's lecture, we would be considering CoinMarketCap which is a tool used to keep track of different crypto assets. This tool is useful for a lot of things but today, we would only use it to check the ranking of assets by Market capitalization. Let's see a few steps below.
- The first step is to visit https://coinmarketcap.com/ and from the landing page, scroll down. See the screenshot below.
Screenshot from CoinMarketCap
- Now, you can see the ranks of the assets from 1 down to about 10,000. You can see Bitcoin (BTC) on number 1, Ethereum (ETH) ranked number 2, Tether (USDT) on number 3, and so on. This is what is known as ranking by market capitalization.
Screenshot from CoinMarketCap
- At this point, let us check on the information of number 4 asset on the rank and that is Binance Coin (BNB). Click on it and the next page, you have the following page.
Screenshot from CoinMarketCap
From the page above, we have;
Applying the Market Capitalization formula to crosscheck if the calculation tallies with the information gotten on the website. We have;
Market Capitalization = 384.62 * 165,116,760.89 = $63,507,208,573. If you compare the calculation with the information on CoinMarketCap, you will realize it's almost the same thing and that makes the formula for calculating Market Capitalization a valid one.
Conclusion
In conclusion, you can now understand that the ranking of crypto assets is not done by the age of their existence rather done by market capitalization which is a product of the current price and circulating supply of an asset which means assets can overtake each other in ranking at any point in time. I hope you enjoy today's lecture again and I expect to see your participation sooner. Thanks to @steemkidss for organizing this medium and many thanks to the Steemit team for the support. Thanks, all.
Homework Task
- Explain Market Capitalization. Include your understanding of current price and circulating supply of an asset. How is market capitalization calculated.
- Explore https://coinmarketcap.com/, show how to check ranking of assets by market capitalization. Select the asset on number 10 and indicate its; current price, circulating supply and market capitalization, justify with the simple calculation. (Screenshot required).
Guidelines
- Write an article of at least 250 words. Keep your explanation as simple as possible.
- Include the tag #grassroot-education3 among the first 4 tags and tag me @fredquantum in your homework entry.
- For Verified Steem kids alone.
- I will check your articles and drop comments on the entries submitted now till 11:59 pm UTC, 05/02/2022.
Cc:-
@steemkidss
@steemitblog
@steemcurator01
@steemcurator02
Thank you so much dear @fredquantum for this wonderful topic. It is really a great one. Thank you for taking time to educate our kids. We appreciate you a lot. Let's see how it goes
It's my pleasure to get involved in a wonderful development like this on Steem, it's definitely going to give birth to powerful crypto gurus in the nearest future. Thank you, @steemkidss.
Can I participate professor?
NO! Sorry, dear. It's only for the verified kids in the community whose age is between 13 - 19 years. Thanks for showing interest.
Ok no problem sir!
Alright.
I will like to participate in this contest.
Good one. I will be expecting your participation.
https://steemit.com/hive-139765/@bossj23/grassroot-crypto-education-vol-3-crypto-market-capitalization-assignment-by-bossj23-or-or-2-2-22