Market capitalization (market cap) is the total value of a cryptocurrency, calculated by multiplying the current price by the circulating supply of coins. It's one of the most important metrics for evaluating and comparing cryptocurrencies, similar to how market cap is used in traditional stock markets.

Market cap helps investors understand the relative size and dominance of a cryptocurrency. A higher market cap generally indicates a more established and less volatile asset, while lower market caps often mean higher risk and potential reward.

Key Characteristics of Market Cap

  • Formula: Market Cap = Price × Circulating Supply
  • Size Indicator: Helps compare cryptocurrencies regardless of price per coin
  • Three Tiers: Large-cap (>$10B), mid-cap ($1B-$10B), small-cap (<$1B)
  • Not Total Investment: Doesn't reflect actual money invested in the asset
  • Liquidity Indicator: Higher market cap often means better liquidity

Real-World Example

If Bitcoin has 19 million BTC in circulation and trades at $50,000, its market cap is $950 billion. Meanwhile, a coin with 1 billion supply at $1 also has a $1 billion market cap—despite being 50,000x cheaper per coin.

Understanding Market Cap is easier when you're familiar with these related concepts:

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