In the crypto world, understanding price metrics is key to making informed trading decisions. However, for those just starting out, the various terms that pop up can be confusing. Don’t worry, this article will explain the important metrics you often see on cryptocurrency exchanges in a simple way. Let’s break them down one by one!
Market Capitalization (Market Cap)
Market capitalization is the total value of a specific crypto project. It is calculated by multiplying the current token price by the total supply available. Market capitalization gives an overview of how big the crypto project is.
Example:
If Project Z has 100,000 tokens, and the price per token is $5, then the market capitalization of Z is $500,000.
Formula: 100,000 x $5 = $500,000.
Remember, the price of a crypto token can change every second, which means the market capitalization will also constantly change.
24-Hour Volume
24-Hour Volume is the total dollar value of all crypto transactions that have occurred in the last 24 hours. This calculates the number of units traded, multiplied by the unit price at that time.
Example:
If Bitcoin’s 24-hour volume is $50 billion, it means traders collectively traded $50 billion worth of Bitcoin in a day.
24-Hour Open
24-Hour Open refers to the price of a crypto asset exactly 24 hours ago. This is important to see price movements over a full day.
24-Hour Low/High
This term refers to the lowest and highest prices of a crypto asset in the last 24 hours. You can think of it as the “highest peak” and “deepest valley” in trading activity during a day.
Example:
If Ethereum’s highest price today is $3,000 and its lowest is $2,800, this means the price volatility is quite high during the day.
Total Supply
Total supply is the total number of crypto token units currently in circulation and available for trading. This number does not account for tokens that are locked or stored in certain contracts.
All-Time High (ATH)
All-Time High (ATH) refers to the highest price ever reached by a specific crypto asset since its launch. On platforms like CoinDesk, ATH is usually calculated from the average price on various exchanges.
Average Transaction Fee
The transaction fee is the dollar amount paid to process one transaction on the blockchain network. This fee is paid to miners or validators in exchange for processing the transaction.
Volatility
Volatility measures how much the price of a crypto asset fluctuates from the average within a certain time period. High volatility means the price often changes drastically in a short time, while low volatility indicates a relatively stable price.
Example:
- Low volatility: Bitcoin’s price only changes by 2-3% in a week.
- High volatility: Bitcoin’s price rises 20% in one day, then falls 15% the next day.
Fiat (FIAT)
FIAT is the term for currency issued by a government, such as the US dollar, euro, or yen. These fiat currencies are not backed by commodities like gold, but only by trust in the government that issues them.
Example:
USD, EUR, and GBP are examples of fiat currencies.
Return
Return measures the percentage increase or decrease in the price of a crypto asset over a certain period, such as 1 week (1W), 1 month (1M), 6 months (6M), or 1 year (1T). This is important to see the asset’s performance over various time periods.
Year-to-Date (YTD)
Year-to-Date (YTD) measures the percentage change in price from the beginning of the year to the present. This helps you understand how well (or poorly) a crypto asset has performed throughout the current year.
Conclusion
Understanding price metrics in cryptocurrency is the key to success in trading. From market capitalization to volatility, all these terms are important to help you analyze the market better. If you want to delve deeper, make sure to keep monitoring these metrics so you can make wiser decisions. Crypto trading is challenging, but with good understanding, you can turn challenges into opportunities!
