Market Cap (Market Capitalization)
In short: Market capitalization, or market cap, is the total value of a cryptocurrency’s circulating supply at its current price.
Market capitalization, or market cap, is the total value of a cryptocurrency’s circulating supply at its current price. It is calculated by multiplying the price of one coin by the number of coins in circulation.
Why it matters
Market cap is a quick way to compare the size of different cryptocurrencies, and most crypto rankings are sorted by it. It also corrects a common mistake: a coin with a low unit price is not necessarily “cheap”, because what matters is price multiplied by supply. The measure has limits, since it is based on the last traded price rather than the money actually invested, and in thin markets a small trade can move it a lot. Many data sites also show fully diluted valuation (FDV), which uses the maximum supply instead of the circulating supply.
Example
Imagine token A trades at $2 and has 50 million coins in circulation, so its market cap is $100 million. Token B trades at just $0.01 but has 20 billion coins in circulation, which gives it a market cap of $200 million. Despite its much lower unit price, token B is the larger of the two.