Market Capitalization

Market capitalization is a calculated metric that estimates the value of a cryptoasset based on its market price and circulating supply.

The basic formula is:

Market Cap = Price × Circulating Supply

For example, if an asset trades at $10 and 20 million units are considered to be in circulation, its calculated market capitalization is $200 million.

Why market cap is used

The price of an individual coin does not reveal the overall scale of an asset because different assets can have very different supplies. Market capitalization incorporates both price and the number of units in circulation.

Limitations

Market cap is a calculated metric rather than the amount of money actually invested in the asset. Selling the entire circulating supply at the quoted market price would generally not be possible because available liquidity is limited.

The calculation also depends on the accuracy of circulating supply data. Different providers may use different methodologies.

Fully Diluted Valuation is used to estimate the value of an asset when its full potential supply is taken into account.