What is market cap in crypto?

How to calculate market cap

Market cap is calculated as price × circulating supply. If a token trades at 2 dollars and 50 million tokens are in circulation, its market cap is 100 million dollars.

Circulating supply means coins that can actually be traded today, not coins still locked for a team, reserved for future rewards or not yet mined. The figure is reported by projects and data sites, so treat it as an estimate rather than an audited number.

Market cap vs fully diluted valuation

Fully diluted valuation (FDV) is the price multiplied by the maximum supply, the number of coins that will ever exist. A large gap between market cap and FDV means many tokens are still to be released, which can add selling pressure as they unlock.

Bitcoin is a simple case: its maximum supply is fixed at 21 million and most of it is already mined. Many newer tokens have only a small share of their supply in circulation.

Why price alone misleads

A low price per coin does not make a coin cheap. A coin at one cent with 200 billion in circulation has a bigger market cap than a coin at 1,000 dollars with 1 million in circulation. Market cap has its own limits too:

• It is not the money invested: a thinly traded coin can show a huge market cap with little liquidity behind it.
• It can be inflated by a tiny circulating supply and a few trades at high prices.
• Trading volume and liquidity show whether you could actually buy or sell near the quoted price.
• For stablecoins, market cap roughly equals the number of tokens issued.

How to use market cap sensibly

Market cap is best used to compare size and risk, not to predict prices. Larger, older networks tend to be more liquid and harder to manipulate, while very small caps can move wildly on a single large order.

Check circulating and maximum supply side by side, look at trading volume, and never treat a market-cap ranking as a recommendation to buy.