The exchange rate of such currency as bitcoin is formed due to active demand, as it is with other currency assets. But since bitcoins have low overall capitalization, bitcoin rate is heavily influenced by mass hype and big players.
Capitalization as in its market cap? If so, then no, this doesn't have an impact on the volatility this market experiences ~ the main factor of volatility is the on-exchange availability of coin supply and fiat liquidity.
I just don't understand why people constantly focus on market caps. The market cap is nothing more than a total valuation in fiat of all coins in existence, and that's really it ~ it contributes to nothing of useful nature.
Especially in the altcoin industry it has been clear that coins with a massive amount of coins in circulation, can easily manipulate their market cap to become even higher than Bitcoin's market, which has already happened.