What is Large Cap?
Let's find out Large Cap meaning, definition in crypto, what is Large Cap, and all other detailed facts.
Large cap, or large capitalization, refers to the market capitalization of at least $ 10 billion. While the term originated in the traditional markets, it’s also applicable in the crypto world. The market cap of a crypto token can be calculated when you multiply the price of the currency by its supply in circulation.
Crypto tokens are classified into three categories based on market cap: small, mid, and large. This allows investors to know what the scale of the project they’re investing in is.
In the crypto world, well-established projects that belong roughly to the top-25 by market cap are considered to be large cap. They are seen as the most popular crypto projects within the crypto industry and are typically backed by a strong community. Furthermore, large cap projects have fewer issues handling adverse events.
Mid-cap projects are valued between $3 billion and $10 billion. Mid-cap projects may show greater growth than large cap projects, but they are often more volatile.
The value of small cap projects ranges between $300 million and $2 billion. These projects have a lot of growth potential but are very volatile in the face of macroeconomic changes.
The market cap of a project can be very revealing to investors and allow them to make better judgments of the financial standing, as well as the community perception. Investors are more likely to put their money into a project with a stronger financial standing and trustworthy community sentiment.
Large cap tokens are often preferred over small or mid-cap tokens due to their business model. Large capitalization points towards a more consistent market performance and may show that the project will have low sensitivity toward small news or events. This makes the large cap assets appear less volatile and thus garner the attention of more investors.
Investors may also be interested in the staking rewards that large cap tokens may promise. As the prices increase, investors can find the interest income of large cap projects beneficial.
Large cap crypto projects tend to show more transparency and authenticity in regard to their operational processes. Investors can be granted access to project information that may help them make well-informed decisions. Furthermore, large cap projects must provide their investors with periodic financial reports and updates.
On the other hand, small cap projects shift their focus exclusively to their business objectives. Although small cap stocks have the highest potential for rapid growth, they are significantly more sensitive to market fluctuations and, therefore, more volatile.
How to Calculate Market Cap
If a project has 40,000 tokens in circulation and the price of one token is $4, the market capitalization is calculated using the following formula:
Market capitalization = 40,000 tokens x $4 per token = $80,000
If the market capitalization exceeds $10 billion, it is considered to be a large cap. Such projects tend to have long-standing market histories and are therefore seen as safe investments.