Market Capitalization

Market capitalization (“market cap”) is the total value of a cryptocurrency, calculated by multiplying its current price by its circulating supply. It is the standard way to compare the relative size of different assets.

How it works

The formula is simply price × circulating supply. Because it uses circulating supply rather than price alone, market cap explains why a coin priced at a few cents can be “larger” than one priced in the thousands: the cheaper coin may have vastly more units in circulation. A related figure, fully diluted valuation, uses the maximum supply instead, showing what the value would be if every possible token existed.

Why it matters

Market cap is the basis for ranking assets and for building market indices. It is a better size signal than price, but it can be misleading when much of the supply is illiquid or tightly held, since the quoted price reflects only the coins actually trading.

Example

A coin trading at $2 with 100 million coins circulating has a market cap of $200 million, larger than a $50 coin with only 1 million in circulation.