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Why Traders Should Chart the Entire Crypto Market Cap

Published 11/11/2018, 06:40 AM
Updated 11/11/2018, 08:15 AM
© Reuters.

Market capitalization gets a lot flack for being a poor metric to measure the value of a cryptocurrency – and perhaps rightly so – but that shouldn't stop traders from using it as a tool to generate a market bias.

To summarize: the market capitalization of a cryptocurrency is a function of market price multiplied by the circulating supply, so its fluctuating value ends up visually mimicking that of price action when plotted on a price chart. And if it mimics price action, then technical analysis – the study of market behavior via price movement – can be applied to it just as if the price chart for bitcoin (BTC) was being analyzed.

It's no secret that cryptocurrencies are highly speculative assets that all bank on the widespread adoption of blockchain and distributed ledger technology (DLT). Since the entire market is so reliant on the success of this factor, it's rare for the trends of individual cryptocurrencies to deviate too far from one another for too long.

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