What is market cap?

Market capitalisation is the standard way to compare crypto assets by size: price × circulating supply. It is more useful than price alone, because price on its own says nothing — a coin at $0.001 with a trillion units is larger than one at $100 with a thousand.

Two misreadings are worth avoiding. First, market cap is not the money that has gone into an asset. If a coin has 1 billion units and the last trade was at $2, the market cap reads $2 billion — even if only a few thousand dollars actually changed hands at that price. The valuation is extrapolated from the marginal trade.

Second, it says nothing about whether you could exit. In a thin market, attempting to sell a meaningful position moves the price against you long before you finish. A large market cap with low liquidity is a trap that catches people regularly.

Also watch the difference between circulating and fully diluted market cap. If most of the supply is locked and scheduled to unlock later, the fully diluted figure is the more honest picture of future dilution.