Market capitalisation, or market cap, is a critical metric used to evaluate the size and significance of a cryptocurrency in the market. It provides investors with a snapshot of a cryptocurrency’s value and potential, helping them make informed decisions. Understanding market cap is essential for anyone who wants to invest in or evaluate cryptocurrencies effectively.
In this guide, we’ll explain what market cap means, how it’s calculated, and the different types of market cap categories that exist within the cryptocurrency world.
What Does Market Capitalisation Mean?
Market capitalisation is a term widely used in both traditional finance and the cryptocurrency world. It refers to the total value of a cryptocurrency or company based on its outstanding coins or shares.
For cryptocurrencies, market cap is calculated by multiplying the current price of a coin by the total number of coins in circulation. This helps give an overview of how large and significant a cryptocurrency is in the broader market.
-
Formula: Market Cap=Price×Circulating Supply
How is Market Capitalisation Calculated in Cryptocurrencies?
The market cap of a cryptocurrency is determined by multiplying the current price of a coin by the circulating supply.
Example Calculation:
If Bitcoin (BTC) is priced at $50,000 and there are 19 million BTC in circulation, its market cap would be:
To check the market cap of any cryptocurrency in real-time, platforms like CoinMarketCap and CoinGecko are widely used. These platforms display real-time market data, including market cap, price, trading volume, and more.
Note: Always check the circulating supply, as the total supply isn’t a useful metric for valuation.
What Does Market Capitalisation Mean for Cryptocurrencies?
In the crypto market, market cap serves as a quick way to gauge the value of a cryptocurrency. A high market cap generally indicates a well-established, stable asset, while a low market cap might suggest that the cryptocurrency is still in development or is highly volatile.
Market Cap Categories:
Cryptocurrencies are divided into three main categories based on their market cap:
-
Large-Cap Cryptocurrencies:
-
Market Cap: Over $10 billion
-
Example: Bitcoin (BTC), Ethereum (ETH)
-
Risk Level: Low to moderate
-
Growth Potential: Moderate, but more stable.
-
-
Mid-Cap Cryptocurrencies:
-
Market Cap: Between $1 billion and $10 billion
-
Example: Chainlink (LINK), Polkadot (DOT)
-
Risk Level: Moderate
-
Growth Potential: High.
-
-
Small-Cap Cryptocurrencies:
-
Market Cap: Under $1 billion
-
Example: Lesser-known altcoins like Shiba Inu (SHIB), VeChain (VET)
-
Risk Level: High
-
Growth Potential: Very high (short-term), but highly volatile.
-
Each category carries its own level of risk and reward potential, and investors should choose according to their risk tolerance.
Example: What is Bitcoin’s Market Capitalisation?
As of mid-2025, Bitcoin’s market capitalisation stands at approximately $2 trillion, based on a price of $101,650 and an estimated circulating supply of 19.89 million BTC.
This market cap is a reflection of Bitcoin’s dominance and popularity in the cryptocurrency space. It is the largest-cap cryptocurrency and is seen by many as the “gold standard” of the crypto market.
Is Market Cap the Best Way to Measure the Popularity of a Cryptocurrency?
While market cap is one of the most important metrics for determining the relative size and dominance of a cryptocurrency, it is not the only factor you should consider. Market cap does not reflect trading volume, liquidity, or volatility—all of which are also critical to understanding a coin’s performance.
Some experts argue that focusing solely on market cap can be misleading. For instance, small-cap cryptocurrencies might have explosive growth potential, but they are highly volatile and subject to sudden price crashes. Conversely, large-cap cryptocurrencies tend to be more stable but may offer lower returns in comparison.
Types of Cryptocurrencies by Market Cap
Large-Cap Cryptocurrencies
These are the most established and trusted cryptocurrencies. Their large market cap indicates a strong position in the market, making them a safer investment option.
-
Example: Bitcoin ($2 trillion market cap)
-
Growth Potential: Generally stable, with moderate growth potential.
-
Volatility: Lower than mid-cap or small-cap coins.
Mid-Cap Cryptocurrencies
Mid-cap cryptocurrencies are typically more volatile but offer higher growth potential than large-cap cryptocurrencies. These coins may be emerging as key players in the market.
-
Example: Chainlink (market cap ~$12 billion)
-
Growth Potential: High, but can fluctuate dramatically.
-
Volatility: Moderate to high.
Small-Cap Cryptocurrencies
Small-cap cryptocurrencies are highly volatile and risky investments, but they can experience significant short-term growth. Be cautious, as many small-cap coins can experience extreme price swings.
-
Example: Shiba Inu (market cap ~$7 billion)
-
Growth Potential: High, but prone to rapid price changes.
-
Volatility: Extremely high.
The Importance of a Holistic Approach
While market capitalisation is a valuable tool for assessing the size and significance of a cryptocurrency, it should not be the only factor when making investment decisions. It is crucial to also consider:
-
Trading volume (liquidity)
-
Volatility (risk level)
-
Liquidity (ability to trade without large price movements)
-
Technical factors like blockchain technology, adoption, and development team
A holistic approach to evaluating cryptocurrencies—by looking at market cap along with other metrics—will help you make more informed and sound investment choices.
FAQs on Market Capitalisation in Cryptocurrencies
Q1: What does market capitalisation mean for cryptocurrencies?
Market capitalisation represents the total value of a cryptocurrency by multiplying its price by the circulating supply. It helps evaluate a coin’s importance and stability.
Q2: How is market cap calculated for cryptocurrencies?
Market cap is calculated by multiplying the price of a single coin by the circulating supply of coins.
Q3: Is market cap the only important metric for evaluating cryptocurrencies?
No, while market cap is important, you should also consider factors like trading volume, liquidity, volatility, and the technology behind the coin before making an investment.