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Familiarity with a concept such as the market value of digital currencies is important when we know that this concept can bring us benefits such as calculating the size of the market, the amount of investment risk, and the amount of liquidity of a digital currency.

In the continuation of this article, we will review the concept of market value, introduce its calculation formula, and examine the benefits of familiarity with market value.

What is the market value?

Market value, or market in English capitalization, also known as the market, is one of the concepts that every shareholder and investor encounters.

Market value is obtained by multiplying the number of shares of a company by the price per share. The market value of each company in the stock market used to determine the size of each company is equal to the total market value of that company’s issued stock.

To obtain the market value of a company, the number of shares issued by the company must be multiplied by the market price per share (closing share price on the trading day). One of the most important factors influencing investors’ decision to invest in a company is its size (its size or smallness), which is calculated through the market value of that company.

The market value of digital currencies

Market value or Market cap is a simple indicator to determine the size (size or small) of the market of a digital currency. The exact meaning of the term Market Capitalization, abbreviated as Market Cap, is “total market capitalization,” which is commonly referred to by economists as “market value” or “total market value.”

This index is an important and effective factor in investment decisions, and familiarity with it helps digital currency market participants to have a better view of the risk, market size, and liquidity of a digital currency.

Market value in the digital currency market is obtained by calculating the total value of mined tokens or coins multiplied by their cash prices, such as dollars or rials. This index is also used to compare the value of different digital currencies. The market cap formula is used to obtain the market value.

Market value formula

What is the market map formula? How to calculate market value? The answers to these questions are simple. To calculate the market value, it is enough to multiply the number of coins in circulation by the price of each coin.

For example, if a digital currency has 10 million tokens or coins and the value of each token is $ 10, the market value of that digital currency is equivalent to $ 100 million.

This figure indicates the size of a market and the amount of working capital. MarketCap shows the buyer whether the digital currency in question is suitable for investment or not.

The difference between market value and transaction value

What is the difference between market value and transaction value? Both of these concepts are the most important concepts of the capital market that should be considered for investing, but it should be noted that the two are different.

Market value is the product of the total number of shares of a company multiplied by the daily price per share of that company; But the value of trades is the sum of the total value of trades made on stocks.

For example, if two trades are made in one day on one stock and the value of the first transaction is 300,000,000 Rials and the value of the second transaction is 450,000,000 Rials, the value of the transactions of the desired stock will be 750,000,000 Rials.

Through the value of transactions, one can understand the number of stocks bought and sold in a working day. Also, through the value of transactions, the market’s liquidity can be estimated to some extent.

The difference between the digital currency market value and the stock market value

Just as the digital currency market differs from the stock market in terms of speed, manipulation, and entry of new competitors, so does the value of the digital currency market and the stock market’s value.

In the previous sections of the article, we reviewed that the market value in the digital currency market is obtained by calculating the total value of the extracted tokens or coins multiplied by their cash prices, such as the dollar or rial. But in the stock market, value is obtained by multiplying the number of shares of a company by the price of each share.

This means that the difference between the digital currency’s market and market value is in their measurement indicators. The first is the number and price of tokens and coins, and the second is the number and price of shares.

Benefits of market value

Although market value may seem insignificant at first glance, it is important to be aware of the benefits of investing. Among the benefits of knowing the market value, we can mention the risk of investing in different cryptocurrencies.

The larger the market cap or market value of a cryptocurrency, the lower the risk of investing in it.

This is because these cryptocurrencies have grown and reached relative stability. The discussion about cryptocurrencies with a smaller market cap is slightly different.

Investing in cryptocurrencies with a smaller market cap or market value can provide the investor with an opportunity for rapid and sharp capital growth.

Cryptocurrencies with smaller marketplaces have more growth opportunities and can be good investment options for venture capitalists because they can be very profitable on the one hand and lose all their value suddenly on the other.

For example, buying and selling Ethereum, the second most valuable market among all digital currencies, would be less risky than investing in digital currencies with relatively small markets such as Dash and Maker. However, it is also more likely to grow fast and sharp in a small market like Dash than in Ethereum.

Conclusion

Market cap and market value is a criterion that helps the investor in determining investment strategies and market analysis. Market Cup can give us an overview of the hustle and bustle of the market.

Especially in the case of Altcoins, this view and this analysis are crucial and can lead to accurate and informed decisions. All of the above can point to some of the risks and opportunities of investing, and there are other factors to consider when investing with less risk.