What is market cap in crypto?

Market capitalization, or market cap, is the price of one coin multiplied by the number of coins in circulation. It gives the total market value of a cryptocurrency and is the usual way to rank coins by size. The idea comes from the stock market, where a company's value is its share price times its number of shares.

A made-up coin trading at $2 with 500 million coins in circulation has a market cap of $1 billion. Data sites such as CoinMarketCap and CoinGecko publish these figures for thousands of coins.

What is the difference between circulating, total and max supply?

• Circulating supply is the number of coins in public hands and able to trade. This is the figure used for market cap.
• Total supply is every coin created so far, including coins that are locked up, for example those reserved for the project's team or early investors.
• Max supply is the most coins that will ever exist. For bitcoin it is 21 million. Some coins, such as ether and Dogecoin, have no fixed cap.

How a project sets and releases its supply is known as its tokenomics.

What is fully diluted value?

Fully diluted value, or FDV, is the price multiplied by the maximum supply. It shows what the coin would be worth at today's price if every planned coin already existed.

A wide gap between market cap and FDV means many coins have yet to reach the market. When locked coins are released to insiders, the extra supply can weigh on the price.

Why does a low price not mean a coin is cheap?

The price of a single coin means little on its own, because projects choose how many coins to create. A coin priced at a tenth of a cent with a trillion coins in circulation has the same $1 billion market cap as a coin priced at $1,000 with a million coins.

This matters most with meme coins, which often trade for tiny fractions of a cent. For such a coin to reach $1, its market cap would have to grow by the same multiple as its price. In some cases that would make it worth more than every other cryptocurrency combined.

What are the limits of market cap?

Market cap is not the amount of money that has gone into a coin. It is the latest trade price applied to every coin, including those that have not moved in years. For a thinly traded token, a handful of small trades can set a price that implies a huge value on paper.

Supply figures can also be unreliable. Circulating supply is often reported by the project itself, and coins lost forever through misplaced keys are still counted. Large holders, known as whales, may control much of what does trade.