Market Capitalisation in Crypto

Market capitalization is a token's price times its circulating supply. It is the quickest way to compare the size of projects, but it can mislead: a token with a small float and large locked supply can show a modest market cap while facing heavy future selling, and thin trading can make the price, and so the market cap, easy to move. Comparing it with fully diluted valuation and real trading volume gives a fuller picture.

The arithmetic

Market cap equals price times circulating supply. A token at $2 with 500 million coins circulating has a $1 billion market cap. Change either input and the number moves, and the supply input is less settled than it looks.

Circulating supply is an estimate. Data sites decide which wallets count as locked, team-held or burned, and two sites can publish different figures for the same token on the same day. When a project unlocks tokens, circulating supply rises, so market cap can climb even while the price falls.

Market cap versus fully diluted valuation

Fully diluted valuation uses the maximum or total supply instead. The gap between the two shows how much supply has yet to arrive. A token whose market cap is a small fraction of its FDV has a large overhang of future unlocks, usually held by teams and early investors with a much lower cost basis than yours.

What market cap is not

• It is not money invested. A $1 billion market cap does not mean $1 billion went in, or that $1 billion could come out. The last trade price is applied to every coin, including coins that have not moved in years.
• It is not liquidity. Thin order books can push the price, and so the market cap, a long way on modest buying. Compare market cap with real trading volume and order book depth.
• It is not value. Two tokens with the same market cap can have very different revenue, usage and holder bases.

How to use it

Market cap is a good first sort. It tells you whether you are looking at a large, widely held asset or a small one where a single holder can move the price. Market cap rankings also drive index weights and Bitcoin dominance. For stablecoins, market cap is roughly the number of tokens outstanding, so changes in stablecoin supply are often read as a gauge of money entering or leaving crypto.

A practical check before buying a small token: compare market cap with FDV, read the unlock schedule, and see whether daily volume is real or comes from a single venue. A low price per coin means nothing on its own. A million coins at $10 and a billion coins at one cent describe the same $10 million project.