How market cap is calculated
Market cap = current price × circulating supply.
“Circulating supply” is the tokens actually in public hands — excluding locked tokens (treasury, team allocations, vested unlocks), burned tokens, and tokens held by the protocol itself. This is where measurement gets contested: projects and aggregators disagree about what counts as “circulating,” especially for assets with heavy team / foundation holdings.
Related metrics:
- Fully diluted valuation (FDV) — price × max supply, including tokens not yet circulating. FDV can be 5-10x market cap for projects early in their vesting schedule.
- Total value locked (TVL) — for DeFi protocols, the value of assets held inside the protocol’s smart contracts. Often compared to market cap as a “market cap / TVL” ratio.
- Realized cap — for Bitcoin and Ethereum specifically: sum of each coin’s value at the time it last moved on-chain. A more resistant-to-manipulation measure of “capital that has flowed into the asset.”
Why traders watch market cap
Market cap rankings drive a lot of flow. Institutional mandates often restrict buying to “top 10” or “top 50” assets; retail flows follow index products like CoinDesk 20 or Bitwise 10 that weight by market cap. An asset breaking into the top 20 for the first time can trigger a self-reinforcing buy wave.
Market cap also reveals where the capital is concentrated. BTC routinely holds 50-55% of total crypto market cap (“BTC dominance”) — rising dominance signals risk-off flows within crypto; falling dominance signals “altseason.”
Risks and considerations
Market cap can be gamed and misleading. A low-float, high-FDV token can have a $100M market cap on $1M of daily volume — you can’t actually buy much at the quoted price without moving it 20%. Newly-launched tokens with small circulating supply and large future unlocks are the canonical trap: the market cap looks low but the FDV (and the eventual circulating supply once vesting unlocks) is 10x higher. Always check both market cap and FDV, look at the vesting schedule, and compare daily volume to market cap before treating the number as meaningful.