Market Cap
Market Capitalization
Total value of a cryptocurrency (price × circulating supply)
Definition
Market capitalisation is the price of the last trade multiplied by the circulating supply. It is a convenient ranking device and a poor valuation: nobody put that amount of money in, and nobody can take that amount out. In DeFi the more revealing number is usually fully diluted valuation, which uses total or maximum supply and therefore prices in the tokens still locked in vesting schedules and emission programmes. A token with 8% of supply circulating at $1 shows an $80M market cap and a $1B FDV, and that 92% gap is scheduled future sell pressure, not a theoretical footnote. Market cap also says nothing about exitability: a $50M cap with $200,000 of on-chain liquidity means the first serious seller discovers the real price.
Market cap is the last traded price multiplied by the tokens in circulation. It is a ranking number, not an amount of money anyone could get out.
Example
Take a protocol with 100M tokens total, 8M circulating, trading at $1. Market cap is $8M, FDV is $100M. Team and investors unlock 2M tokens a month starting in six months, which is 25% of the current float hitting the market every month. Separately, compare two protocols both at a $500M market cap: one collects $2M a year in fees, the other $40M. The first trades at 250 times revenue, the second at 12.5. The market caps are identical and tell you nothing; the ratio tells you something.
How it works
Price times circulating supply. Use total or maximum supply instead and you get fully diluted valuation, which includes the tokens still locked in vesting and emissions.
Why it matters
Most bad token comparisons come from taking market cap at face value. The float, the unlock schedule and the liquidity behind it decide what the number actually means.
What to check
Compare market cap with FDV and read the unlock schedule. Check how circulating supply is defined, compare the cap with real fee revenue, and check on-chain liquidity relative to the cap before assuming you can exit.
Risks to Consider
- Low float with high FDV: the visible market cap is small precisely because the sell pressure has not arrived yet
- Circulating supply is often self-reported and treats treasury, foundation and locked tokens inconsistently
- Market cap assumes every token is worth the marginal price, which is false as soon as liquidity is thin relative to the cap
- Comparing market caps across tokens with different emission schedules and revenue models leads to confidently wrong conclusions
Common Questions
Market cap or fully diluted valuation?
Both, and the gap between them is the useful signal. Market cap tells you what the currently tradable supply is worth; FDV tells you what the market is implicitly valuing the project at once everything is issued. When FDV is many multiples of market cap, read the unlock schedule before anything else, because that schedule is the dominant driver of price for the next year or two.
Does a large market cap mean a token is safer?
It means more capital has passed through and usually that liquidity is deeper, which reduces how violently the price moves. It says nothing about smart contract risk, treasury management, revenue or governance capture. Plenty of nine-figure market caps have gone to near zero in weeks; size buys liquidity, not solvency.
Could holders actually cash out at the market cap?
No, and not remotely. Market cap extrapolates the last trade to every token in existence, while a real exit walks down the order book or the AMM curve. On a thin token, selling 1% of the supply can move the price 30% or more. A useful sanity check is to compare market cap with on-chain liquidity: a $50M cap sitting on $200,000 of liquidity is a 250:1 ratio and is effectively unexitable at scale.