Definition
Market capitalization is the total market value of an asset's units in circulation: the current price multiplied by the circulating supply for a cryptocurrency, or by the shares outstanding for a stock.
How it works
The formula is simple: market cap = price × circulating supply (or shares outstanding for a stock). Because both inputs change, market cap moves every time the price moves. It also changes when new coins or shares enter circulation, or when units are removed through burns or buybacks.
Market cap is mainly used to compare size. A coin priced at $0.01 can be worth more in total than a coin priced at $500 if it has far more units in circulation, so the unit price alone says little about how big a project is. Rankings on crypto and stock data sites are usually sorted by market cap, and assets are often grouped into large-cap, mid-cap and small-cap, although there is no single official cutoff.
Market cap is not the amount of money invested in an asset, and it is not the amount holders could receive by selling everything. If large holders tried to sell at once, the price would fall while they sold. For crypto, it also helps to check the fully diluted valuation, which counts coins that are not yet in circulation.
Example (hypothetical numbers)
Suppose Coin A trades at $2 and has 500,000,000 coins in circulation.
Market cap = $2 × 500,000,000 = $1,000,000,000.
Coin B trades at $40 with 10,000,000 coins in circulation: $40 × 10,000,000 = $400,000,000.
Coin B has the higher price per coin, but Coin A is the larger asset by market cap.
Common mistakes
- Calling a coin cheap or expensive from its unit price instead of its market cap.
- Assuming market cap equals the cash that has flowed into the asset.
- Ignoring coins that will be unlocked later, which can increase supply and dilute existing holders.
Related calculators
This glossary is for education only and is not investment advice. Examples use hypothetical numbers.