Introduction: Why is market capitalization considered a vital indicator in the crypto market?
Market capitalization of cryptocurrencies is one of the most important metrics that investors rely on to understand the size of the project and its strength in the market. Although this value does not always reflect the true value of the project, it provides an initial insight into liquidity, stability, and trust in the currency. In 2025, with the crypto market inflating to over $2.8 trillion, understanding market capitalization became essential for making informed investment decisions.
1. What is market capitalization?
Market capitalization is the total value of all cryptocurrencies traded in the market. It is calculated by multiplying the current price of the coin by the number of coins available in circulation (Circulating Supply). For example:
Bitcoin (BTC): Price $109,579 × 19,500,000 circulating coins = $2.13 trillion.
Solana (SOL): Price $177.08 × 600 million circulating coins = $106.2 billion.
2. The difference between market capitalization and traditional market capital
In traditional financial markets, market capitalization is calculated by multiplying the stock price by the number of shares outstanding. But in the crypto market, the same principle is used with variations:
Limited coins (like Bitcoin): have a fixed supply (Max Supply), making market capitalization a dynamic indicator affected by supply and demand.
Mineable coins (like Ethereum): use circulating supply instead of total supply, as not all coins may have entered the market yet.
Stablecoins (like USDT): market capitalization depends on cash collateral and not on trading.
3. The importance of market capitalization in evaluating coins
Market capitalization helps investors determine the level of risk and growth opportunities. Here are the main uses:
A. Classification of cryptocurrencies
Large cap coins: like BTC ($2.13 trillion) and ETH ($289 billion), are considered stable investments.
Mid cap coins: like SOL ($106.2 billion) and BNB ($93.9 billion), offer moderate opportunities between stability and growth.
Small cap coins: like Berachain (BERA, $354 million) and Hyperliquid (HYPE, $8.41 billion), are considered adventure investments with high profitability potential.
B. Measuring liquidity and demand
High market capitalization indicates increased liquidity, making it easier to buy and sell without significantly affecting the price. For example, USDC with a market cap exceeding $500 billion is one of the most liquid stablecoins on Ethereum.
C. Growth forecasts
Low market cap coins often achieve sharp increases if they receive institutional support or strategic partnerships. For example, Hyperliquid (HYPE) which rose from $0.001 to $9.3 in one year, and its market cap increased to $8.41 billion thanks to technical updates and institutional backing.
4. Practical examples of market capitalization
Bitcoin (BTC): the highest market cap in the world, with a dominance exceeding 50% of the digital market.
Ethereum (ETH): second highest market cap ($289 billion), with the Pectra upgrade that supported liquidity on the DeFi layer.
Solana (SOL): market cap reached $106.2 billion, with a strong rebound from $100 to $177.08 in May 2025.
Berachain (BERA): market cap exceeded $354 million after the launch of Boyco Vaults which attracted $2.3 billion in liquidity.
5. The limitation of market capitalization as a measure
Despite its importance, market capitalization is not always an accurate indicator, for two reasons:
Circulating Supply: some coins like XRP or HBAR have a limited supply, which could mislead investors if they do not review the whitepaper.
Market manipulation: small-cap coins can experience sudden spikes due to social hype, like Pepe (PEPE) which reached $1.6 billion and then dropped by 90% in 2024.
6. Conclusion: How to benefit from market capitalization?
Market capitalization is not everything, but it is a first step in analyzing the digital market. Here’s how to use it effectively:
Preference for large projects: like BTC, ETH, SOL, to reduce risks.
Monitoring weekly changes: such as the rise in BERA's market value from $0 to $354 million in 3 months.
Linking it to other indicators: such as liquidity on DeFiLlama or data analysis on Lookonchain.
📌 Remember:
Market capitalization is not a guarantee of success, but it is an indicator to identify promising projects. Always review the fundamentals such as the team, technology, and partnerships before investing.
