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Market Cap

Market cap (market capitalization) is a metric used to measure the total value of a cryptocurrency. It is calculated by multiplying the current price of a token by its circulating supply. Market cap is one of the most commonly used indicators to rank and compare crypto assets, assess project size, and evaluate risk.

Websites like CoinGecko and CoinMarketCap track live market cap data for thousands of tokens.

How Market Cap Works

  • Basic Formula –Market Cap = Token Price × Circulating Supply
  • Circulating Supply – Refers to the number of tokens currently available in the market.
  • Price Changes – Market cap fluctuates with token price movements.
  • Ranking Metric – Used to sort and compare cryptocurrencies by size and dominance.
  • Total vs Fully Diluted – Some platforms also show Fully Diluted Market Cap, which includes max supply.

Key Features

  • Project Size Indicator – Reflects how large or valuable a project is in dollar terms.
  • Comparative Tool – Helps compare BTC, ETH, altcoins, stablecoins, and memecoins.
  • Market Sentiment Tracker – High market cap tokens are often seen as more established.
  • Doesn’t Equal Liquidity – A high market cap doesn’t guarantee active trading or deep liquidity.
  • Used in Indexes – Many crypto indexes and portfolios are weighted by market cap.

Benefits of Market Cap

  • Simple and Transparent – Easy to understand and calculate.
  • Helps Spot Trends – Market cap rankings shift with investor interest and project growth.
  • Risk Assessment Tool – Lower market cap tokens tend to be riskier but offer higher upside.
  • Portfolio Management – Investors often diversify across small-cap, mid-cap, and large-cap assets.
  • Macro View of Crypto – Total crypto market cap gives a big-picture view of the industry’s size.

Use Cases of Market Cap

  1. Ranking Coins – Bitcoin and Ethereum consistently hold the top spots by market cap.
  2. Identifying Growth – Watching small- and mid-cap projects grow over time.
  3. DeFi TVL Context – Comparing protocol market cap to Total Value Locked (TVL) for valuation.
  4. Risk Allocation – Large-cap tokens for stability, small-cap tokens for higher risk/reward.
  5. Bull vs Bear Cycles – Total crypto market cap helps track cycle tops and bottoms.

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