Market Capitalization

Market Capitalization or market cap represents the market value of a specific asset’s outstanding publicly traded shares.

A market cap is used as an important indicator of public opinion of a company’s net worth and is used to calculate certain forms of stock valuation.

In its simplest form, Market Cap = N x P where N is the number of outstanding shares and P reflects the closing price per share of a given company stock.

Of note, market cap measures only the equity value of a company.

Other factors can also impact a company’s value, such as its form of capital structure or the value of its equity and debt.

Market Capitalization Explained

Many investors observe market caps as they can help rank the size of publicly traded companies.

These are more useful than specific metrics such as sales or revenues, at least in terms of ranking purposes.

Market cap is also a useful measure of a stock exchange or index. Beyond this scope, regional or market wide analyses can be made using these figures.

This term is also a useful metric in classifying different company stocks by size. For example, stocks are divided into large-cap, middle-cap, and small-cap companies.

These are broad-based measures that help analysts distinguish different stocks and vary by country.

For example, a small-cap US stock may be much larger than a large-cap stock in a less developed country or market.

This term market cap is not reserved for just equities however and can extend to the cryptocurrency space.

Rather than detailing outstanding shares, a crypto market cap is used to measure the relative size of the digital asset.

For example, crypto market cap is calculated by multiplying the current market price of a particular coin or token with the total number of coins in circulation.