VWAMC Explained
Volume Weighted Average Market Capitalization
Last updated
Volume Weighted Average Market Capitalization
Last updated
Volume-Weighted Average Market Capitalization (VWAMC) combines a cryptocurrency's market capitalization with its trading volume to provide a metric that reflects its true market activity and price influence over a specific period.
Formula
The formula for VWAMC is:
Where:
Market Cap is the product of the token's price and circulating supply.
Volume is the total trading volume over the same time period.
Filters Outliers VWAMC smooths out price manipulation or anomalies caused by low-volume trades. Tokens with artificially inflated prices but low trading volumes will have a reduced impact on the weighted average.
Market Health Indicator It offers a better understanding of a token's market stability. High VWAMC values suggest strong trading activity relative to the token's market cap, reflecting high investor interest and confidence.
More Accurate Valuation By accounting for volume, VWAMC provides a price closer to the "fair market value," as it reflects both the price and liquidity dynamics of the market.
Risk Assessment Traders and analysts use VWAMC to assess liquidity risks. A significant deviation between VWAMC and the token’s spot price can indicate potential price volatility or liquidity issues.
Benchmark for Comparisons It allows for better cross-comparison between cryptocurrencies or other assets, especially for those with varying liquidity levels.
