Market capitalisation (market cap) is the total value of all coins of a cryptocurrency that are currently in circulation. It is calculated by multiplying the current price by the circulating supply. If a coin trades at €2 and 500 million coins are circulating, its market cap is €1 billion.
Market cap is how data sites such as CoinMarketCap and CoinGecko rank cryptocurrencies, and it is the quickest way to compare the size of two projects. But it is also one of the most misunderstood numbers in crypto. This guide explains what it really measures, the traps beginners fall into, and the other metrics you should look at before drawing conclusions.
Key takeaways
- Market cap = price × circulating supply. It measures size, not quality.
- A low price per coin says nothing about whether a coin is cheap — supply matters just as much.
- Fully diluted valuation (FDV) shows what the market cap would be if every coin that will ever exist were in circulation.
- Check trading volume and liquidity: a big market cap with thin trading can be misleading.
How market cap is calculated
The formula is simple:
- Market cap = current price × circulating supply
Circulating supply is the number of coins that are publicly available and moving around the market right now. It excludes coins that are locked, reserved for the team, not yet mined or permanently destroyed («burned»).
Because the price changes every second, market cap changes every second too. When people say «crypto lost €100 billion today», they mean the combined market cap of all coins fell by that amount — not that €100 billion of real money left the market. Market cap is a mark-to-market estimate based on the last traded price.
Why a low price does not mean a coin is cheap
One of the most common beginner mistakes is thinking a coin priced at €0.001 has more room to grow than one priced at €50,000. The price of a single coin is meaningless on its own, because projects choose very different supplies.
| Coin | Price | Circulating supply | Market cap |
|---|---|---|---|
| Coin A | €0.001 | 1 trillion | €1 billion |
| Coin B | €50 | 20 million | €1 billion |
Both coins in this example are valued at exactly the same amount. For Coin A to reach €1, its market cap would have to grow to €1 trillion — larger than most global companies. Always think in market cap, not in price per coin.
This is also why it is normal to own a fraction of a coin. You can buy 0.001 of a bitcoin; the value of your holding is what matters, not how many whole coins you own.
Circulating, total and maximum supply
Data sites usually show three supply figures. Understanding the difference helps you spot future selling pressure.
- Circulating supply — coins available on the market today.
- Total supply — all coins created so far, minus any burned, including those that are locked or reserved.
- Maximum supply — the hard cap that can ever exist, if the project has one. Bitcoin’s maximum is 21 million coins, enforced by its code and the halving schedule. Ethereum has no fixed maximum.
If circulating supply is much smaller than total or maximum supply, a lot of new coins will enter the market over time. Unless demand grows at the same pace, that extra supply tends to push the price down.
Fully diluted valuation (FDV)
Fully diluted valuation answers the question: what would this project be worth if every coin were already in circulation at today’s price?
- FDV = current price × maximum (or total) supply
A project with a €200 million market cap but a €2 billion FDV has only about 10% of its coins in circulation. The other 90% will be released through team and investor vesting, ecosystem funds or rewards. Large token unlocks are a well-known source of selling pressure — read our guide to tokenomics to learn how to check an unlock schedule.
Market cap categories
There is no official definition, but the crypto industry roughly groups coins like this:
| Category | Typical size | What to expect |
|---|---|---|
| Large cap | Above €10 billion | Most liquid, usually lower (but still high) volatility |
| Mid cap | €1–10 billion | Established projects with more room to move in both directions |
| Small cap | €100 million – €1 billion | Higher risk, thinner liquidity |
| Micro cap | Below €100 million | Very speculative; easier to manipulate |
Smaller coins can rise faster, but they also fall faster and are more likely to fail completely. Many of the coins that were in the top 20 a few years ago are no longer in the top 100.
The limits of market cap
Market cap is a starting point, not a verdict. Keep these weaknesses in mind:
- Thin liquidity inflates it. If a token trades only a few thousand euros a day, a single small purchase can push the price — and the market cap — far higher than anyone could actually sell for.
- Locked and lost coins are hard to count. Millions of bitcoins are believed to be lost forever, yet they are still counted in circulating supply.
- It says nothing about usefulness. A memecoin can have a larger market cap than a project with real users and revenue.
- Data can be wrong. Supply figures are often self-reported by projects. Check the project’s own documentation and on-chain data when you can.
Combine market cap with 24-hour trading volume, the number of exchanges listing the coin, the token distribution and the actual use of the network before you form an opinion.
Total crypto market cap and Bitcoin dominance
The total crypto market cap is the sum of every coin’s market cap. Traders watch it to judge the overall mood of the market. A related figure is Bitcoin dominance: Bitcoin’s share of the total market cap. When dominance rises, money is usually flowing into Bitcoin and out of riskier altcoins; when it falls, altcoins are gaining relative to Bitcoin.
Neither number predicts the future, but both help you understand whether the market is in a risk-on or risk-off phase. Our guide to bull and bear markets explains how these phases usually play out.
Frequently asked questions
Is a higher market cap always better?
No. A higher market cap means a project is larger and usually more liquid, but it does not make it a better investment. Large caps tend to move less, which reduces both risk and potential upside.
Can market cap be manipulated?
Yes, especially for small tokens with few holders and low trading volume. A team that controls most of the supply can trade among its own wallets to create an impressive-looking price and market cap.
What is the difference between market cap and trading volume?
Market cap is the value of all circulating coins. Trading volume is how much of the coin actually changed hands over a period, usually 24 hours. Volume shows how active and liquid the market is.
Where can I check a coin’s market cap?
Independent data aggregators such as CoinGecko and CoinMarketCap list market cap, circulating and maximum supply, FDV and volume for thousands of coins.
Next step: learn how tokenomics affects a coin’s price, or look up any unfamiliar term in our crypto glossary.
