# What is Crypto Market Cap? (and how important is it?)

Markus Scharnowski

Updated on November 03

By now, there are thousands of Cryptocurrencies out there. From tiny meme coins worth only fractions of a cent to the no. 1 currency out there – Bitcoin – with a price of thousands of dollars for each coin.

But as you might have noticed, some coins have been issued in the billions or even trillions – making you wonder if their total value might still be something to take seriously.

So – how do you determine the current monetary value of a Crypto project as a whole?

Enter market cap.

Short for market capitalization, the market cap in Crypto shows the combined value of all coins currently available, usually called the “circulating supply.” The formula for the market cap is simple:

Circulating supply x price of a single coin = market cap.

So let’s say you have one million coins of “BlockPer Coin” in circulation, and each one trades for \$2 – the market cap of BlockPer Coin would be \$2,000,000. (That’s an example – we don’t have our own coin – yet.)

## What is “fully diluted market cap?”

You may have heard this term – it’s often used in conjunction with the simple “market cap.” Both are important, and the difference is quite simple.

Market cap is the combined value of the circulating supply – all coins that have already been created (minted or mined.)

Fully diluted market cap, on the other hand, includes all the coins yet to be created, a number which is called the maximum (or max) supply. Every serious Crypto project defines a max supply for their tokens, as it allows to calculate the full potential once all tokens have been issued.

As you see above, in the case of bitcoin, the market cap as of late 2022 is \$365,246,278, which is 19,185,118 x the \$19,037. The fully diluted market cap is \$399,789,002, which is 21,000,000 x \$19,037, since Bitcoins max supply is 21 million.

## Why is market cap important?

Market cap is one of the quickest and, at the same time, most telling pieces of information an investor can get for any given cryptocurrency: Its total value at the time being.

Now, that’s not the only important factor to consider when analyzing a cryptocurrency – there are many others – but it tends to correlate with volatility: A large market cap Crypto – say \$10 billion or more – often has a long history, lots of investors, and usually (except Bitcoin) a strong, proven team behind it. That makes it more stable and less susceptible to market swings.

A small project – say with a \$10 million market cap – tends to be more volatile: A single investor could sell or buy a significant portion of that entire market cap in an instant, making the price drop or climb steeply.

Now, Crypto is volatile by definition. But as a rule of thumb, a larger market cap is generally seen as a sign of stability and a higher chance of maintaining value.

## Summary

The Crypto market cap is the total value of a project at the time being. It’s calculated by multiplying the current number of coins in circulation (called circulating supply) by the current price per coin. Projects with a large market cap tend to be more stable, given that they usually have more investors and are often backed by an established team. Small market cap projects tend to be more volatile and show more exposure to market swings.

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