Market cap Meaning
Market capitalization, also known as market cap, is the total monetary value of a cryptocurrency, calculated by multiplying the current price of a single coin/token by the total number of coins/tokens in circulation
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What Is a Market Cap in Crypto?
Market capitalization (MCAP) in crypto shows the total value of a digital asset and is used to evaluate a coin or tokenās stability and growth potential. It is an indicator that shows the value of each cryptocurrency in the market.
It is calculated using the following formula:
Market Cap = Cryptocurrency Price Ć Circulating Supply
Where:
- Cryptocurrency price is the real-time trading price of a coin/token on exchanges.
- Circulating supply refers to the total number of tokens available in the market, excluding locked, reserved, or unmined tokens.
For instance, if a cryptocurrency token is priced at $20 and has 10 billion tokens in circulation, the total market cap would be:
$20 Ć 10B = $200 billion
Market cap is a crucial factor that helps businesses determine which cryptocurrencies are stable and have high growth potential.
Why Is Market Capitalization Important in Crypto?
Market capitalization is a key metric for evaluating a cryptocurrencyās credibility and liquidity. It helps businesses make strategic decisions about which cryptocurrencies to trade, invest in, or accept as a form of payment.
For businesses, the market cap is one of the key metrics when choosing:
- The cryptocurrencies with good liquidity and stability for transactions when using crypto payment gateway services.
- Digital assets that are widely accepted, secure, and less volatile for business purposes.
- The tokens with strong adoption and long-term viability in blockchain-based transactions.
A higher market cap usually indicates greater stability, whereas a lower market cap signals higher risk and volatility.
Different Categories of Market Capitalization
The categorization of market capitalization in crypto is used to understand the value and long-term growth of cryptocurrencies. There are three categories of cryptocurrencies by market cap:
- Large-cap cryptocurrencies ($10B+ Market Cap)
These are more established digital assets, such as Bitcoin ($1.6T market cap) and Ethereum ($251B market cap), as of March 4, 2025. Their size and liquidity make them less risky compared to smaller-cap coins.
- Mid-cap cryptocurrencies ($1B – $10B Market Cap)
Mid-cap coins offer a balance between risk and reward. They have a higher growth potential than large-cap assets but can be more volatile.
- Small-cap cryptocurrencies (<$1B Market Cap)
These cryptocurrencies are newer or niche projects with high volatility and risk, but they may offer substantial growth potential for early adopters.
Why Market Cap Matters in Crypto?
Market capitalization plays a key role in estimating the size and popularity of a cryptocurrency. This metric helps investors understand a cryptocurrencyās market strength compared to others.
For example, a cryptocurrency with a market cap of $50 billion is generally considered more stable and reliable than one with a market cap of $5 billion.
Additionally, cryptocurrency market capitalization can be compared to a companyās market cap, which represents the total value of a company’s outstanding shares. Large corporations typically have higher market caps and are often considered more stable and reliable for investment.
Factors That Influence Market Cap
- Price. The cryptocurrency market cap changes under its price fluctuation.
- Circulating supply. Cryptocurrencies with less number of coins/tokens have a larger market cap under otherwise equal conditions.
- Market sentiments. Outside events like technology innovation or geopolitical risks can influence the market cap in crypto. Positive sentiments help market cap grow, on the contrary, cryptocurrency market cap decreases in the event of negative sentiments in the market.Ā
- Adoption. The more widely used and reliable the cryptocurrency, the larger its market cap is.
- Competition. Cryptocurrencies with an insignificant number of competitors usually have a larger market cap.
The interconnection of these factors illustrates that every single factor can influence the rest, as a result on the market cap in general. For instance, the increase in cryptocurrency price can be affected by its popularity growth.