What is market capitalisation?
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 4 min
In short
Market cap is price multiplied by circulating supply. It is used to compare the scale of assets, but it is not an amount that could actually change hands — and the figure shifts depending on how supply is counted.
Key points
- Price times circulating supply, as a measure of scale
- Not an amount that could be traded at that price
- The figure depends on how circulating supply is defined
- Distinct from fully diluted valuation
Definition
An asset's price multiplied by the quantity considered to be in circulation, used to compare the relative scale of assets.
At a price of 1,000 yen with 100 million units circulating, the market cap is 100 billion yen. Price alone says nothing about scale, since supply differs: a low unit price with a huge supply can still be a large asset. Compare caps, not prices.
Crucially, that figure is not what selling would realise. Selling a large position moves the price down, so the proceeds fall short of the headline number. Liquidity — how much can actually be traded — has to be checked separately.
The other subtlety is how circulating supply is defined. Whether locked or unissued tokens are counted changes the answer. Fully diluted valuation, which counts tokens not yet issued, can be far larger than the circulating figure, and confusing the two badly distorts your sense of scale.
Watch out for
- · A large cap guarantees neither liquidity nor safety
- · Different data providers count circulating supply differently
- · Confusing market cap with fully diluted valuation distorts scale badly