What is Market Cap and Liquidity?
1️⃣ Market Cap (Market Capitalization)
Think of this as "How big is the project in total value?"
Formula:
Market Cap = Current Price × Total Circulating Supply
Purpose: Shows the overall size/value of a coin or token in the market.
Example:
If a token price = $2 and circulating supply = 10 million tokens,
Market Cap = $20 million.
Key point: A high market cap ≠ high trading activity. It just means theoretical total value based on current price.
2️⃣ Liquidity
This is "How easily can you buy or sell without moving the price too much?"
Measured by how much money is available in the order books or pools for trading.
If liquidity is high:
You can buy/sell large amounts with little price slippage.
If liquidity is low:
Even small trades can move the price a lot.
Example:
A token might have $20M market cap but only $200K liquidity — meaning big trades will cause large swings.
📊 The Key Difference:
Market Cap = size of the project in value terms.
Liquidity = ease of trading that asset.
💡 Why it matters for traders like you:
High market cap + low liquidity → Risky, because the price can be manipulated easily.
High liquidity is often more important than market cap for short-term trades, because it ensures you can exit without huge losses from slippage.
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