What Is Market Capitalization?
Also known as: Market Cap, Market Capitalization, MCap
In short
Market capitalization is the total value of a cryptocurrency, calculated by multiplying its circulating supply by the current unit price. It is one of the most basic measures used to compare the size of projects.
The calculation is simple: a coin with 10 million units in circulation and a price of 20 dollars has a market cap of 200 million dollars. This measure shows that the unit price alone can be misleading. A token priced at 0.01 dollars can have a higher market cap than a coin priced at thousands of dollars if its supply is in the hundreds of billions.
Market cap is calculated based on the circulating supply; the value calculated as if the entire maximum supply were on the market is called fully diluted valuation (FDV). A large gap between the two indicates that new tokens may enter the market in the future through unlocks. Indicators such as the total market cap of the cryptocurrency market and Bitcoin dominance are also based on this calculation.
The measure has limits. With a token that has low liquidity, small purchases can inflate the price and therefore the market cap; this does not mean that value could actually be converted to cash. Because lost or permanently locked coins are often also included in the circulating supply, market cap is interpreted together with data such as trading volume and liquidity.
Last updated: · This content is for information purposes only and is not investment advice.