What is market cap?

One coin costs a few cents and another thousands of euros: which one is really “bigger”? The price of a single coin isn’t enough to answer, just as the price of a slice doesn’t tell you what the whole pizza costs.

Take a hypothetical cryptocurrency priced at €2 with 10 million coins in circulation. Its market cap is €20 million. Another, priced at just €0.10 but with one billion coins in circulation, has a market cap of €100 million. The second has a lower price per unit, but a larger total valuation.

The formula is: market cap = price × circulating supply. Circulating supply refers to the coins considered available on the market, not necessarily all those that have been created or may be created in the future.

Why it matters

Market cap is used to rank and compare cryptocurrencies by size. We think it helps you avoid the “it costs next to nothing, so it’s cheap” trap. The price per unit, without the supply, gives you only half the picture.

It doesn’t measure, however, the quality of the technology, real usage or a network’s security. Nor does a large market cap guarantee a stable price. For a fuller picture you need other data too, such as liquidity and trading volume.

What to watch out for

Market cap isn’t money sitting in some vault. If it rises by a million euros, that doesn’t mean the same amount was invested. A change in price changes the valuation of the entire circulating supply. Also, not all holders can necessarily sell at the price shown on the screen, especially when there are few buyers.

Watch out, too, for the difference from fully diluted valuation (FDV), which factors in the total or maximum supply, depending on the methodology. Future token unlocks can increase the circulating amount. So we check which supply each platform uses, especially when the available data is incomplete.