Market Capitalization
Key Takeaways
Market capitalization (market cap) measures the relative size of a cryptocurrency by multiplying its current price by its circulating supply.
Market cap does not represent the total amount of money invested in an asset; a small price change can produce a large shift in market cap.
Fully Diluted Valuation (FDV) is a related metric that uses total or maximum supply instead of circulating supply, and may differ significantly from market cap for newer projects.
Within the blockchain industry, market capitalization (or market cap) refers to a metric that tells you what the relative size of a cryptocurrency is. It is calculated by multiplying the current market price of a coin or token by its
circulating supply:
Market Cap = Current Price x Circulating Supply
For example, if each unit of a cryptocurrency trades at $10.00 and the circulating supply is 50,000,000 coins, the market cap for that cryptocurrency would be $500,000,000.
Market Cap Is Not Money Inflow
A common misconception is that market cap represents how much money has flowed into a cryptocurrency. It does not. Because market cap is calculated using price, a relatively small price change can produce a significant shift in the figure.
Using the example above, if the price moves from $10.00 to $15.00, the market cap rises from $500,000,000 to $750,000,000. This does not mean $250,000,000 entered the market. The actual amount of capital needed to move the price depends on trading volume and liquidity.
Volume refers to the total number of assets exchanged within a given period.
Liquidity describes how easily an asset can be bought or sold without significantly affecting its price. In a high-volume, liquid market, moving the price requires substantially more capital because many orders exist across a wide range of price levels. In a thin, low-volume market, a comparatively small amount of capital can cause a large price movement and a correspondingly large shift in market cap.
Market Cap vs. Fully Diluted Valuation
For newer projects where a large portion of tokens remains locked, vesting, or unreleased, the FDV can be substantially higher than the current market cap. Comparing these two figures is a useful step when evaluating a project's
tokenomics, as a large gap between them may suggest significant future sell pressure when additional supply enters circulation.
Market Cap Categories
Crypto assets are commonly grouped into tiers based on their market cap. These categories are not formally standardized and thresholds vary by source, but they are widely used as general reference points:
Large-cap: typically projects with a market cap above approximately $10 billion. Generally considered more established with deeper liquidity.
Mid-cap: roughly between $1 billion and $10 billion. Often associated with a balance between growth potential and risk.
Small-cap: below approximately $1 billion. Typically associated with higher
volatility and lower liquidity.
Beyond individual assets, the total cryptocurrency market cap aggregates the combined value of all crypto assets.
Bitcoin dominance, which measures Bitcoin's share of the total crypto market cap, is a widely tracked indicator of broader market sentiment.
What Is a Good Market Cap for Crypto?
There is no universal threshold for what constitutes a good market cap. Larger market caps are generally associated with more established projects and greater liquidity. Smaller market caps may suggest higher growth potential but also higher risk. Market cap should be evaluated alongside other factors including trading volume, tokenomics, and project fundamentals.
What Is the Total Crypto Market Cap?
The total cryptocurrency market cap is the sum of the market caps of all crypto assets in circulation. It is used as a broad measure of the overall size and health of the crypto market. Changes in Bitcoin's share of this total are tracked through Bitcoin dominance.
Further Reading