Market cap is the total dollar value of all coins of one type in existence right now
Market capitalization (or market cap) is calculated by multiplying the current price of one coin by the total number of coins that exist. If Bitcoin is trading at $40,000 and there are 21 million Bitcoin in existence, the market cap is $840 billion. That number tells you the size of that cryptocurrency relative to others, but it does not tell you whether the price will go up or down.
Market cap is useful for comparing cryptocurrencies to each other — it shows you which ones have the most total value in the market. A coin with a $500 billion market cap is larger than a coin with a $50 billion market cap. But market cap alone does not measure how risky a coin is, how much it will trade, or how likely it is to gain value.
Key Takeaways
- Market cap equals the price of one coin multiplied by the total number of coins in circulation, and it changes every time the price moves.
- Market cap lets you compare the size of different cryptocurrencies, but a larger market cap does not mean a coin is safer or will perform better.
- A coin can have a low price but a high market cap if many coins exist, or a high price but a low market cap if few coins exist.
- Coins are often grouped by market cap size — large-cap, mid-cap, and small-cap — which can affect how easily you can buy or sell them.
How market cap changes throughout the day
Market cap is not fixed. It moves constantly because the price of the coin changes constantly. If Bitcoin's price rises from $40,000 to $41,000, the market cap rises by $21 billion (1,000 dollars × 21 million coins). If the price falls to $39,000, the market cap falls by the same amount. The number of coins in existence usually stays the same, so price movement is what drives market cap movement.
Some cryptocurrencies have a maximum supply — Bitcoin will never exceed 21 million coins. Others, like Ethereum, do not have a hard cap, so new coins are created over time. When new coins are created, the market cap can stay the same or fall even if the price per coin stays the same, because the total number of coins has increased.
The difference between price and market cap
Price and market cap are not the same thing, and confusing them is one of the most common mistakes people make. A coin can have a very low price but a very high market cap. For example, a coin trading at $0.50 with 10 billion coins in existence has a market cap of $5 billion. A coin trading at $50,000 with only 100,000 coins in existence has a market cap of only $5 billion. Both have the same market cap, but the price per coin is wildly different.
This matters because a low price does not mean a coin is cheap or a good deal. The price per coin tells you nothing about value. Market cap tells you the total size of the investment in that coin. If you are trying to understand how large a cryptocurrency is in the overall market, market cap is what you need to look at, not the price of a single coin.
Large-cap, mid-cap, and small-cap cryptocurrencies
Cryptocurrencies are often sorted into groups based on market cap size. Large-cap coins typically have a market cap above $10 billion and include Bitcoin and Ethereum. These tend to be older, more established coins with more trading volume and lower price swings. Mid-cap coins usually fall between $1 billion and $10 billion in market cap. Small-cap coins have a market cap below $1 billion.
These groupings matter because they affect how easily you can buy and sell a coin. Large-cap coins have many buyers and sellers at any moment, so you can usually trade them quickly without moving the price much. Small-cap coins may have fewer buyers and sellers, so a large purchase or sale can move the price more noticeably. Small-cap coins are also more likely to be delisted from exchanges or to stop trading altogether.
Why market cap is not a measure of safety or potential
A high market cap does not mean a coin is safe or that it will gain value. It straightforward means a lot of money is currently invested in it. Bitcoin has the largest market cap in crypto, but its price still moves sharply and it can lose value. A small-cap coin could potentially grow much faster than a large-cap coin if demand increases, but it could also lose most or all of its value.
Market cap also does not tell you about the technology behind a coin, the team running it, or whether it solves a real problem. Two coins with the same market cap can have completely different prospects. One might be backed by active development and real use cases, while the other might be abandoned or purely speculative. You need to research the coin itself, not just look at its market cap ranking.
How to find a coin's market cap
Most cryptocurrency tracking websites display market cap prominently. CoinMarketCap and CoinGecko are two of the largest and most widely used. Both sites list cryptocurrencies ranked by market cap, show the current price, the total number of coins in circulation, and the maximum supply if one exists. You can search for a specific coin by name or ticker symbol and see its market cap compared to other coins.
These sites update their data frequently throughout the day as prices change. The exact market cap number you see may vary slightly between sites because they pull data from different exchanges and update at different times, but the ranking and general size should be consistent. If you are comparing two coins to understand their relative size in the market, either site will give you accurate information.
Market cap versus trading volume
Market cap and trading volume are different measures that tell you different things. Market cap is the total value of all coins in existence. Trading volume is the total dollar amount of coins bought and sold over a specific time period, usually 24 hours. A coin can have a high market cap but low trading volume, meaning the total value is large but not many people are actively buying and selling it right now.
Low trading volume can make it harder to buy or sell a coin quickly without affecting the price. High trading volume usually means you can trade more easily. If you are planning to buy a significant amount of a coin, checking both the market cap and the 24-hour trading volume will give you a better picture of how liquid the coin is and how easily you can enter or exit a position.
Frequently Asked Questions
Can a coin with a low price have a high market cap?
Yes. Market cap depends on price multiplied by the number of coins in existence. A coin priced at $0.01 with 100 billion coins in circulation has a $1 billion market cap. A coin priced at $1,000 with only 1 million coins has a $1 billion market cap. Price per coin and market cap are independent of each other.
Does a higher market cap mean the coin is safer?
Not necessarily. A higher market cap means more money is invested in the coin and it usually has more trading volume, which can make it easier to buy and sell. But a large market cap does not protect against price drops or project failure. Bitcoin has the largest market cap and still experiences sharp price swings.
What happens to market cap when new coins are created?
When new coins are created (called minting or mining), the total number of coins increases. If the price stays the same, the market cap increases because there are more coins. If the price falls to offset the new coins, the market cap may stay roughly the same. The effect depends on whether demand for the coin increases or decreases.
How often does market cap change?
Market cap changes constantly throughout the day because the price of the coin changes constantly. Every time the price moves, even by a small amount, the market cap moves with it. The number of coins in circulation usually stays the same, so price movement is the main driver of market cap changes.
Should I only buy coins with large market caps?
Market cap alone should not be your only factor in deciding what to buy. Large-cap coins tend to be more established and easier to trade, but they may have less room to grow. Small-cap coins are riskier but could potentially grow faster. Research the technology, the team, and the use case of any coin before investing, regardless of its market cap.