What Is Market Cap in Crypto and Why Does It Affect Price? (2026)

Market capitalization in crypto is a metric used to determine the total value of a digital asset. It is calculated by multiplying the current price of a single coin or token by the total number of coins or tokens currently in circulation (circulating supply). This metric is important for investors and projects because it helps determine the stability and overall market dominance of a project. 

In this article, we will dive into market cap in crypto, how to calculate market cap, and offer guidance on identifying stable projects. Additionally, we’ll compare market cap with other important indicators, such as TVL and daily volume, used in evaluating the growth potential of crypto projects.

What is Market Cap in crypto?

Market cap is an important metric that helps individual traders and institutional investors understand the total dollar value of a particular cryptocurrency. It is calculated by multiplying the current price of one coin by the total number of coins in circulation. For example, if a crypto asset costs $100 and there are 10 million assets in supply, its market cap is a total of $1 billion.

For investors, market capitalization (market cap) serves as a valuation metric because it combines both the cryptocurrency’s price and circulating supply to provide a comprehensive picture of a cryptocurrency’s market position and overall worth. This further helps investors understand the long-term market trends of the coin and whether they are likely to see long-term growth in the coin.

Generally, a higher market cap often indicates high demand and a less volatile coin, while smaller market caps suggest higher risk but also great opportunities for returns. While market cap is an important tool for making informed investment decisions, it shouldn’t be the sole basis for your investment. There are other factors to consider when investing in a token, which we will discuss further in this article.

Does Market Cap Really Matter in Crypto?

Yes, market cap matters in crypto. The cryptocurrency market ranking highly depends on market capitalization, as it is directly calculated using the cryptocurrency’s price, and changes in price cause fluctuations in market capitalization.

Tokens with higher market caps indicate that they are stable and have market dominance, making them theoretically good for long-term investments. While those with low market caps indicate high risk and less stability.

Market capitalization (market cap) can be misleading because it doesn’t always accurately reflect the actual market liquidity or project quality. Some tokens have large supplies and can appear valuable even when only a small portion is actively traded. In cases where most tokens are locked, held by insiders, or have low trading volume, the market cap gives a false sense of stability and market adoption.

For instance, a token might have a $1 billion market cap, but if daily trading volume is under $1 million, it means only a small amount of money actually supports that price. For this reason, market cap should not be the only metric used for investment decisions. Consider factors such as liquidity, project fundamentals, token distribution, and community engagement to determine market value.

Next Read: Find the best cryptocurrencies to buy now, evaluated based on market cap, market liquidity, user adoption, network security, and price.

How to Calculate Crypto Market Cap

If you want to know how to calculate market cap in crypto, multiply the current market price of the specific cryptocurrency by the current circulating supply.

• Formula: Market cap = Price x Circulating supply

With the formula, you can understand what market capitalization is and calculate its market value. Let’s use Bitcoin (BTC) and Ethereum (ETH) as examples:

• Bitcoin: If Bitcoin is trading at $68,000, and there are about 19.7 million BTC in circulation:

Market Cap = 68,000 × 19,700,000 = 1,339,600,000,000

• Ethereum: Assuming Ethereum’s price is $3,200, and there are roughly 120 million ETH in circulation:

Market Cap = 3,200 × 120,000,000 = 384,000,000,000.

Circulating Supply vs Fully Diluted Supply

The circulating supply refers to the total number of cryptocurrencies that are currently available to the public and can be traded on the market, not the maximum supply. Investors can freely trade, buy, or sell these coins. The circulating supply indicates the market’s current size and valuation, enabling investors to make informed investment decisions based on the current market cap.

On the other hand, fully diluted supply, also known as fully diluted valuation (FDV), represents the maximum number of coins that will ever exist, including total supply and those not yet released, locked in smart contracts, or reserved for future development and team incentives.

What are the Key Differences Between Market Cap and Other Metrics

Although market capitalization (market cap) is a great indicator of a cryptocurrency’s size and stability, it is advisable to consider other factors to make informed decisions. The following are other key metrics that you can consider alongside a cryptocurrency’s market cap and how they compare:

Market Cap and TVL

As discussed earlier, market cap accounts for the total value of a cryptocurrency. This value is determined by multiplying the current price of the token by the number of coins in circulation. Meanwhile, Total Value Locked (TVL) is a metric that combines the total value of digital assets locked, staked, or committed in a specific blockchain, DeFi platform, or decentralized application (dApp). 

TVL indicates the total value of users’ deposits into a protocol through liquidity pools, staking, or lending. It also reflects the level of trust, participation, and real-world use a DeFi project attracts.

When users trust a protocol, they often share their ideas with others, leading to increased adoption and engagement with a DeFi platform. As a result, investors can compare TVL across projects to identify which protocols are gaining traction and which may be losing user interest.

For DeFi projects, it is best to evaluate performance using both market cap and TVL. A higher market cap with low TVL may be a sign of weak adoption, while strong TVL with a steady market cap indicates growth and user confidence. Both metrics work together to ensure a balanced view of a project’s health and long-term potential in the DeFi ecosystem.

Market Cap and Volume

If a crypto asset has a high market capitalization but low trading volume, it means the coin appears valuable on paper but may be difficult to trade without affecting its price. If a coin’s 24-hour trading volume is more than its market cap within a time frame, investors may be speculating about its potential growth.

When comparing market cap and volume, you will gain a deeper understanding of both the project’s perceived market value and actual market activity. Proper understanding will help you identify which digital currencies have real demand versus those sustained mainly by speculation.

What Are the Categories of Crypto by Market Cap?

There are three categories of cryptocurrencies by market cap:

Large-cap Cryptocurrencies

Large-cap cryptocurrencies have a market cap of over $10 billion, which includes coins such as Bitcoin, Ethereum, and Ripple (XRP). These cryptocurrencies have a higher trading volume when compared to other crypto assets.

Mid-cap Cryptocurrencies

Mid-cap cryptocurrencies include digital assets with a market cap between $1 billion and $10 billion. They often represent growing projects with real-world potential and solid communities. Although they are more volatile than large-caps, mid-cap cryptocurrencies like Polkadot or Cardano offer strong opportunities for investors who are seeking balanced growth and innovation.

Low-cap Cryptocurrencies

With a market cap of less than $1 billion, this category shows the highest price volatility and is known as a high-risk investment. They include early-stage tokens with limited adoption. Compared to other tokens, they usually have a lower volume, low exchange support, or both. While they can offer significant profits if successful, they also carry great risks of price fluctuations. Some notable examples of small-cap cryptocurrencies include Hyper, Fluid, and Pepenode.

Market Cap FAQs

What is the Current Crypto Market Cap?

The current global crypto market cap is $3.78 trillion. Meanwhile, the top five cryptocurrencies with the highest market capitalization are Bitcoin, Ethereum, Tether USDT, USD Coin (USDC), and Binance Coin (BNB).

What is the Highest Crypto Market Cap Ever?

As of July 2025, the total global crypto market cap reached $4 trillion. At the time of writing, the total market capitalization of Bitcoin (BTC) is $2.14 trillion (CoinMarketCap), representing 58.26% of the market. Meanwhile, the total market cap of stablecoins is $311 billion, representing over 8% of the total crypto market cap.

How to Calculate Crypto Market Cap?

To calculate the crypto market cap, use the formula: Market cap = Price x Circulating supply. So, you multiply the current price of the crypto asset by its circulating supply to calculate the market cap.

What is BTC Market Cap?

Bitcoin (BTC) market is over $2.1 trillion, according to the current market data available on CoinMarketCap (CMC).

What is ETH Market Cap?

Ethereum’s (ETH) market cap is about $446 billion.

What is a Good Market Cap for Cryptocurrency?

There is no one single ‘good market cap’ for cryptocurrency, as the best option depends on your needs, trading goals, and risk tolerance.

Conclusion

Market cap is an important indicator for understanding the total market value and size of cryptocurrency, but it should not be the only factor you evaluate when making investment decisions. You may be able to compare assets and assess market shares, but it doesn’t reflect market trends, how a coin is currently traded and sold on crypto exchanges, or how strong its project fundamentals are.

Therefore, it is advisable to always combine market cap with other metrics such as liquidity, trading volume, and total value locked to maximize return on investment. This will not only help you identify coins based on a good market performance but also on a long-term growth potential.

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