The difference between volume and market cap in cryptocurrency trading is very important for better understanding market dynamics:
---
✅ 1. Volume
Definition: It is the total value or number of transactions that have taken place on the currency over a specified period (usually over 24 hours).
What does it show?
It measures trading activity and liquidity in the market.
If the volume is high, it means that the currency is active and there is significant interest in it.
If it's low, this indicates a lack of interest or weak liquidity.
Example:
If 10,000 coins are traded at a price of 1 dollar over 24 hours, the trading volume is 10,000 dollars.
---
✅ 2. Market Cap
Definition: It is the total value of the currency in the market, and it is calculated as follows:
\text{Market Cap} = \text{current price of the currency} × \text{total supply of the currency}
It measures the size and strength of the project compared to others in the market.
High market cap currencies are considered more stable and less prone to fluctuations.
Example:
If the price of the currency is 2 dollars and the total supply is 1,000,000 coins, then the market cap is:
2 × 1,000,000 = 2,000,000 \text{ dollars}
---
🎯 The fundamental difference
---
Important point:
A currency can have a large market cap but low trading volume, indicating a lack of activity or weak liquidity.
Conversely, a currency may have a large trading volume but a small market cap, indicating active trading but a generally small project size.