Market capitalization (market capitalization, market cap for short) is a metric that reflects the total market value of all units of an asset available in circulation. In the world of cryptocurrencies, capitalization is calculated by multiplying the current price of one coin by the number of coins in circulation.
Why this metric is needed
Capitalization helps assess the relative scale of a project and compare cryptocurrencies with one another. An asset with a high price per unit is not necessarily larger: what matters is precisely the product of price and the volume in circulation. That is why capitalization is often used to rank coins and assess their place in the market.
- price per unit — the value of one coin;
- circulating supply — the number of available coins;
- capitalization — the product of these values.
At the same time, capitalization does not reflect every nuance. It is affected by liquidity, the share of coins in active circulation, and the specifics of issuance. Therefore, the metric is useful to consider alongside other metrics, rather than as the sole reference point when analyzing a project.
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