Trading
Market Cap
Market Capitalization - the total value of a cryptocurrency, calculated by multiplying the current price by the circulating supply. Used to rank and compare the relative size of cryptocurrencies.
Last updated: January 5, 2025
What is Market Cap?
Market capitalization (market cap) represents the total dollar value of a cryptocurrency. It’s calculated as:
Market Cap = Current Price × Circulating Supply
Market Cap Example
Bitcoin:
- Price: $70,000
- Circulating Supply: 19.5 million BTC
- Market Cap: $70,000 × 19,500,000 = $1.365 trillion
Types of Market Cap
Circulating Market Cap
- Uses coins currently in circulation
- Most commonly quoted figure
- Excludes locked/vesting tokens
Fully Diluted Valuation (FDV)
- Uses total/maximum supply
- Shows potential future market cap
- Important for new tokens with low circulation
Example Comparison
| Metric | Circulating | FDV |
|---|---|---|
| Supply Used | 19.5M BTC | 21M BTC |
| Market Cap | $1.365T | $1.47T |
Market Cap Categories
Large Cap ($10B+)
- Bitcoin, Ethereum
- Most established
- Lower volatility
- Examples: BTC, ETH, BNB, SOL
Mid Cap ($1B-$10B)
- Growing projects
- Higher risk/reward
- Examples: LINK, UNI, AAVE
Small Cap ($100M-$1B)
- Higher volatility
- Potential for large gains or losses
- Less liquid
Micro Cap (Under $100M)
- Very high risk
- Often new projects
- Low liquidity
- Potential for manipulation
Why Market Cap Matters
1. Size Comparison
Compare cryptocurrencies regardless of price:
- Coin A: $100 price, 1 million supply = $100M cap
- Coin B: $1 price, 200 million supply = $200M cap
- Coin B is “larger” despite lower price
2. Investment Decisions
- Large caps: More stable, institutional-friendly
- Small caps: Higher risk, higher potential return
3. Price Potential
Math example:
- Coin at $1M market cap reaching $1B = 1,000x
- Coin at $100B reaching $1T = 10x
- Smaller caps have more room to grow
Market Cap Limitations
Doesn’t Show Liquidity
- High cap doesn’t mean easy to sell
- Actual trading volume matters
Can Be Manipulated
- Low-supply tokens can have inflated caps
- Wash trading increases apparent cap
Ignores Token Economics
- Inflation rates
- Unlocking schedules
- Burn mechanisms
Circulating Supply Issues
- Not always accurately reported
- Lost/burned coins still counted
- Locked tokens may unlock
Using Market Cap Wisely
Compare Within Categories
- Compare ETH to SOL, not ETH to micro caps
- Similar market caps = similar maturity
Watch Cap Changes
- Rising cap without price increase = inflation
- Falling cap with stable price = deflation
Consider FDV
- If FDV >> Market Cap, future dilution coming
- Important for new token investments
Top Cryptocurrencies by Market Cap
| Rank | Crypto | Market Cap (Est.) |
|---|---|---|
| 1 | Bitcoin (BTC) | $1.3T+ |
| 2 | Ethereum (ETH) | $400B+ |
| 3 | Tether (USDT) | $100B+ |
| 4 | BNB | $80B+ |
| 5 | Solana (SOL) | $60B+ |
Values fluctuate - check current data on exchanges like Binance or CoinGecko
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