What is Market Cap in Crypto?
Market cap is a metric used to help traders and investors understand the value or value potential of a particular cryptocurrency. It’s a concept with roots in traditional investing, where market cap is used to quantify the dollar value of shares in circulation for a company.
The size of a market cap can help investors make inferences about the risk profile of a coin, its potential for long-term growth, and its market dominance.
How is Market Cap Calculated?
There are two common ways to express cryptocurrency market cap: circulating supply or fully diluted supply. Market cap can be calculated by using the number of coins currently in circulation (circulating supply). Or it can be calculated using the number of coins that will be in circulation once the limit is reached (full diluted supply).
Given that this serves mainly as a tool for making investment decisions in the present, circulating supply is almost exclusively used when calculating market cap. However, if you’re set to be a long term holder it’s worth considering the impacts of a fully diluted supply on your stake.
Market cap based on circulating supply is calculated with the following formula:
Current Price x Circulating Supply = Market Cap
