Market Cap

Market capitalization, or market cap, is the simplest way to compare the size of different crypto assets. The formula is price multiplied by circulating supply. If a coin trades at 2 dollars and 500 million coins are in circulation, its market cap is 1 billion dollars. Rankings on sites like CoinGecko and CoinMarketCap are sorted by this figure.

Price alone can be misleading. A token priced at 0.01 dollars is not cheap if there are 10 trillion of them, because that is a 100 billion dollar market cap. A coin priced at 50,000 dollars is not necessarily expensive if only 100 coins exist. Market cap puts assets on a comparable footing, which is why experienced participants look at it before price.

Market cap has limits. It assumes every coin could be sold at the current price, which is never true for thinly traded assets, and it counts coins that may be lost forever. It also ignores tokens that are not yet unlocked, which is why fully diluted valuation is often shown alongside it.