Market Cap
Market cap, short for market capitalization, is the total value of a cryptocurrency's circulating coins, calculated as the current price multiplied by the circulating supply. It is the most common way to compare the size of different crypto assets.
How market cap is calculated
The formula is simple: price × circulating supply. Circulating supply is the number of coins or tokens that are currently available to trade, excluding those that are locked, unissued or held back by a project.
Say a token trades at 2 dollars and 50 million tokens circulate. Its market cap is 100 million dollars. A second token trades at 0.01 dollars with 50 billion tokens in circulation, giving a market cap of 500 million dollars. Despite its lower price, the second one is the larger asset by market cap.
Why it matters
Market cap puts assets with very different prices and supplies on the same scale. A coin's price alone says nothing about its size, because supplies range from millions to hundreds of billions of units. Rankings, indices and measures such as Bitcoin dominance are all built on market cap.
It also helps you think about growth. Doubling the price of an asset means doubling its market cap, which requires much more new money for a large asset than for a small one.
What market cap does not tell you
Market cap is not money that exists or could be withdrawn. It applies the last trade price to every coin, but if many holders tried to sell at once, the price would fall. For small tokens with thin trading, a few trades can inflate market cap enormously.
It also ignores future supply. Many tokens have a small circulating supply today and large amounts scheduled to unlock later. Fully diluted valuation, which uses the maximum or total supply instead, shows how big the valuation would be if all tokens were in circulation. A large gap between the two can mean heavy dilution ahead.
Finally, circulating supply figures come from projects and data providers and can differ between sources, so the same asset may show different market caps on different sites.
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Frequently asked questions
Is a low-priced coin cheap?
Not necessarily. A low price combined with a huge supply can still mean a high market cap. Comparing market caps, not unit prices, tells you how assets relate in size.
What is the difference between market cap and FDV?
Market cap uses circulating supply, while fully diluted valuation uses the maximum or total supply. FDV shows the valuation if every planned token already existed.
Does a large market cap mean an asset is safe?
No. Larger assets tend to have deeper markets, but they can still lose a large share of their value, and market cap says nothing about technology, team or legal risk.
Related terms
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