The sum is simple. Take the latest traded price, multiply by the number of coins in circulation, and you have a market cap. Borrowed from stock markets, it gives a rough sense of scale, and it is the default sort order on nearly every listing site. As a way of separating the very large from the very small, it does its job well enough.
Where it misleads is in what people assume it represents. A market cap is not the amount of money that has gone into a project. It is one number, the price of the most recent trade, multiplied across every coin, including coins nobody has offered to sell. If a large holder tried to exit, the price would fall as they sold, so the headline figure could never be realised in cash.
The supply figure is the other soft spot. <a href="/glossary/circulating-supply/">Circulating supply</a> excludes coins that are locked, unissued or held by the team, but the definition varies between sources and can jump when a lock-up ends. <a href="/glossary/fully-diluted-valuation/">Fully diluted valuation</a> uses the eventual maximum supply instead, which can be dramatically larger. Two sites can quote very different caps for the same coin without either being wrong.
Use it as a rough weight class, not a verdict. A small cap is not automatically cheap and a large one is not automatically safe, because both describe size rather than merit or risk. Alongside the cap, look at how much actually trades and how deep the book is, since a coin can carry an impressive valuation while a modest sell order moves the price. Our <a href="/coins/">coin pages</a> show these figures side by side.
How to Evaluate a Crypto Project
Key takeaways
- Market cap equals price multiplied by circulating supply, and nothing more, so it is certainly not money invested.
- Always check which supply definition a source uses, because circulating and fully diluted figures can differ enormously.
- Daily volume and order-book depth say far more about whether a position can be exited than the cap does.
Market Capitalisation — frequently asked questions
Does a low market cap mean a coin is cheap?
No. Price per coin and market cap are different things, and a project can issue billions of units so that each costs a fraction of a penny while the whole is valued highly. Calling something cheap requires a view on what it is worth, which the cap does not provide. It measures size, much as a scale measures weight rather than value.
Why do two websites show different market caps for the same coin?
Usually because they count supply differently, with one excluding locked or team-held tokens that the other includes, or because they draw price from a different set of exchanges. Neither is necessarily wrong, as they are answering slightly different questions. Check each site's supply column before comparing, and favour sources that publish their methodology.
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