What is Market cap?

How it works

market_cap = price × circulating_supply

Bitcoin at $75,000 with ~19.7M BTC in circulation = ~$1.5T market cap. Ethereum at $3,400 × ~120M ETH = ~$408B. The metric collapses two numbers people often misread separately ("price" and "supply") into one comparable size figure.

There are three supply concepts that matter:

• Circulating supply — coins actually in the market and tradable
• Total supply — circulating + locked/vested coins not yet released
• Max supply — the protocol cap (Bitcoin's 21M, for example)

"Fully diluted valuation" (FDV) uses max supply rather than circulating: FDV = price × max_supply. FDV can be wildly higher than market cap for projects with most of their tokens still locked. A token with $50M market cap and $5B FDV is signaling that 99% of the supply is yet to come — and most of those holders have lower cost basis than current buyers.

Example

Two tokens both trading at $0.50:

• Token A: circulating supply 100M, market cap $50M
• Token B: circulating supply 10B, market cap $5B

Same price, 100× different market cap. To 10× from here, Token A needs to grow to $500M cap (achievable for a real project); Token B needs to grow to $50B (top-15 of all crypto). The "low price = cheap" intuition is wrong — only the cap matters for sizing potential return.

Why it matters

Market cap is the primary way to compare tokens fairly:

• Size context. "BTC is $1.5T" vs "ETH is $400B" tells you something about market positioning.
• Sanity check on hype. A new token "going to $1" sounds great until you check the supply — at 100B circulating supply that's a $100B cap, larger than ~98% of all crypto. Most likely impossible.
• Allocation logic. Some traders weight portfolios by market cap; others use it as a screen ("I won't buy anything below $50M cap due to liquidity risk").
• Comparing to other asset classes. Bitcoin's $1.5T cap puts it ahead of silver but behind gold ($15T+), Apple ($3T+), and the entire global stock market ($110T+).

Caveat: market cap can be misleading for low-float tokens where most supply is locked. A token with $100M cap might have only $5M actually liquid; the displayed cap dramatically overstates the effort needed to push the price either way.