Well-established projects and organizations having a market capitalization of $10 billion or above are called large cap or big cap projects/organizations.
What is Large Cap?
Cryptocurrencies that have a market capitalization of or above $10 billion are called large cap tokens. Market capitalization of a project’s token can be calculated by multiplying the currency price with its circulating supply.
How to Calculate the Market Cap of a Token?
Let’s assume a token AAA has a supply of 20,000 and the price of one token is $0.20. So what would be its market capitalization?
Market capitalization = 20,000 tokens x $0.20 each = $4,000
The market capitalization of AAA is $4,000.
Assuming that the market capitalization of AAA is $10 billion or more, it would be called a large cap.
Typically, large cap projects have a long-standing history in the market. It makes them a safer investment option for investors.
Large Cap vs Small Cap
Based on the market capitalization, crypto tokens can be classified into three categories: large, mid, and small cap. One of the purposes of this categorization is to let investors know what they are investing in.
In crypto space, a large cap token belongs to a well-established and popular project, typically belonging to the top-25 category. These are usually the most popular projects in the crypto and blockchain industry with a strong community. Besides long-standing history, a large cap project is capable of handling adverse events.
A project with a market capitalization value between $3 billion and $10 billion is categorized as a mid-cap project. Typically, mid cap projects have a higher percentage of growth as compared to large cap. However, they tend to be more volatile.
A project with a market cap ranging between $300 million and $2 billion is generally a small cap project. It has more growth potential but is most sensitive to macroeconomic shifts.
Why Do Large Cap Crypto Tokens Attract Investors?
Market capitalization of a project gives a lot of context to investors. While every project is different, market capitalization lets investors better judge the financial standing and the trust of the crypto community in a specific project.
When compared with small or mid cap tokens, large cap tokens may be preferred because of the related project’s vast business model. It promotes more consistent performance and generally means the project will be least sensitive to small news and events. Resultantly, large cap tokens are less volatile and attract more investors.
Staking reward is another reason to invest in large cap tokens. With an increase in prices, investors also benefit from the interest income that is offered by such projects.
Large cap projects are more transparent and authentic when it comes to operations. Investors can have access to the information related to the project that allows them to make informed decisions. Similarly, when it comes to publicly traded large cap companies, they must give periodic financial statements to their investors.
Small cap firms, on the other hand, strictly focus on business objectives. Even though they have the potential to grow rapidly, it is mostly variable. This makes small cap stocks more volatile and sensitive to headwinds.