It's either you are here for the moonshots, or for building the long-term bag, we would agree that the goal is winning, and winning big.
A winning investor understands how to evaluate digital assets and it is by knowing its Market Capitalization.
Just getting started with crypto? Awesome: In general, Market cap tells you how big or risky a project is, and helps you make smarter decisions on investments.
Crypto Market Cap as you can already guess is simply a metric that is used to measure the total value of a cryptocurrency. An important measuring tool in the hands of investors and analysts, it tells you about a coin’s size, influence, and potential place in your portfolio.
As a foundational metric, it doesn’t have all the answers as it is just one piece of the puzzle, but it does help you spot the difference between a promising project and a pump-and-dump trap.
Now, let's get into the good stuff: Market Cap, how it is calculated, why it matters and when should you question its information.
What Does Market Capitalization Mean in Cryptocurrency?
Market capitalization in crypto is the total value of all the coins or tokens in circulation.
It is calculated by multiplying the current price per coin by the total number of coins in circulation.
MC = Current Price per Coin x Total Circulating Supply
Example : if a coin is trading at $2 and there are 100 million of these coins in circulation, the market cap is $200 million.This number helps investors access and compare the relative size and value of cryptocurrencies.
Is Market Cap the same as trading volume?
Market cap is not the same as trading volume, while market cap shows a coin’s total value, trading volume tells you how much of that coin is being bought and sold (traded) within a certain time frame, say in 24 hours.
A cryptocurrency is said to be in high trading volume when there are a lot of activities with that coin; people buying, selling, or even hyping the coin. Low trading volumes simply means that the coin has fewer people trading it or its just seating still.
Is Market Cap the same as Cashflow?
Cashflow is a common word in the business world, it refers to how much of actual money flows in and out of the business, say income from sales, and spendings on company expenses. It would be important to note that in crypto, cashflow only applies if you are analysing a blockchain project as a business. This is because most cryptocurrencies are not companies, they are digital assets.
What do we mean? Unlike Apple, Starbucks or Netflix that generate revenue from selling products and services, Bitcoin does not sell anything, Dogecoin does not offer any services nor do they have employees on payroll etc since they exist as decentralised systems.
Yet some crypto projects especially in Decentralized Finance (DeFi) or blockchain platforms are considered digital businesses because they earn revenue in the form of fees from swaps, loans and smart contract interactions. While the market shows the total value of a cryptocurrency in circulation, cashflow reveals the actual money moving in and out of a business, showing if the project is truly generating real-world value or not.
What Are the Limitations of Using Market Cap in Crypto?
As mentioned earlier, Market cap is only one piece of the puzzle and relying on it alone can lead to some pretty misleading conclusions. Therefore a need to examine the full picture before taking your investment decisions. Here are the reasons why you should take market cap with a grain of salt.
Price Volatility Can Skew the Numbers
Market cap is based on prices. A cryptocurrency's market cap is determined by its price at that particular time. We already know that crypto prices are volatile, they swing wildly and can change at a blink of an eye. Therefore any slight change in the price can seem like a big difference even when it's not. Reason why you should look beyond certain price jumps before assuming a coin is the next big thing.
Circulating vs Fully Diluted Supply
Circulating supply refers to the amount of tokens or coins currently in circulation. Fully diluted supply on the other hand refers to the total of coins that will ever be released, that is; coins in circulation, coins reserved for the team, or future releases and tokens that haven’t been minted or unlocked yet.
It is worth noting that Market cap typically uses the circulating supply and there are many projects that hold undiluted supply. What happens then when they release all their tokens and coins? The market cap changes drastically.
Example: if a project has 15 million tokens in circulation but will eventually release 100 million, its market cap today might look small but the fully diluted cap could be 10x bigger.
Liquidity Issues
Liquidity refers to how quick or easy a token or coin can be bought or sold without much change in price. If a coin has high liquidity, it means many people are trading in it as opposed to an illiquid coin. Any minor change on the trade on illiquid coins can change prices big time.
In some cases, market caps are artificially inflated through wash trading, pump-and-dump schemes, or low-volume markets where a few actors control the price.
A market cap records the prices of the coins in circulation irrespective of its liquidity, this may make a token look valuable yet we don't know how easy it is to sell or buy. Another reason why you can't completely trust market cap on investment decisions.
Market Cap Doesn’t Show Real-World Use or Activity
As an investor, you should be concerned about the real world applications of projects you want to get involved in. Market cap can present value on paper but say nothing on how healthy or active the project is nor its real-world use.
Beyond Market Cap: Other Key Indicators
Total Value Locked (TVL)
Total value locked as the name suggests measures how much crypto is currently locked into a project’s smart contracts. It is like seeing how much money people have deposited into a crypto project, same as how much cash customers have put into a bank. The more money that’s locked in, the more people clearly trust and use that platform.
TVL is usually used to measure Decentralised Finance (DeFi) platforms like lending protocols, liquidity pools, or staking systems.
High TVL = Real usage and community confidence
Low TVL = Possibly early-stage or lacking traction
Trading Volume
Trading volume refers to how much of a cryptocurrency is bought or sold in a given period of time, usually 24 hours. It shows the demand of that particular cryptocurrency.
A high trading volume means the asset is liquid and actively traded, making it easier for investors to enter or exit positions without causing large price swings and vice versa.
Developer Activity
This measures how much work (improvements) is being done on a cryptocurrency project´s technology. How its developers are working on things like code commits, software updates, GitHub repository activity, bug fixes, and major protocol upgrades.
If there are ongoing developments it means the project is active and improving, and focused on long-term growth. If not so, the project is stagnant or may be abandoned.
Making investments based only on market cap would be like judging a book from its cover which is highly discouraged. You should consider other metrics as seen above for clearer insights.
How Are Cryptocurrencies Categorized by Market Cap?
Apart from being a metric to determine the total value of the coins or tokens generated by the cryptocurrency, it is also used to group crypto currencies. That is Large-cap, Mid-cap and small-cap. Let us look at them side by side.
- Large-Cap cryptocurrencies are those cryptocurrencies that have a market cap of $10B+ and are known for stability, strong brand recognition, and widespread adoption. They are the dependable green flags of the cryptocurrency market.
- Mid-Cap Cryptocurrencies: With a market cap between $1 billion to $10 billion, they have significant growth potential but come with moderate risk due to less market stability than Large-Caps. For example, Avalanche (AVAX) and Polygon (POL) differentiate themselves through unique technologies and expanding ecosystems, setting themselves up to join the spotlight.
- Small-Cap Cryptocurrencies are highly speculative and can offer massive returns. They are wild, and can easily skyrocket your returns as they can leave you handing. They are also more vulnerable to market manipulation and failure.
Top 10 Cryptocurrencies by Market Cap
Having seen what market cap is about, you might want to know the top 10 cryptocurrencies leading the market. These coins dominate in value, adoption, and influence, shaping the future of the crypto world. According to Coinmarketcap August 2025. The ranking is as follows.
How Professionals Use Market Cap in Crypto Decision-Making
For crypto pros, market cap is their benchmarking tool, they use it to influence their decisions in crypto. You may fall in one or more of these categories: Analysts and Researchers, Investors, Traders, Fund Managers and Venture Capitalists, using market cap for various reasons.
- Comparing scale: Pros use market cap to determine that Big‑cap coins are the steady and safe ones. Mid-caps? They’re the ones that could grow fast and surprise you while the Small-caps are full of risks and need a rethinking before any action upon them.
- Portfolio design: Before building a crypto portfolio, pros analyse the market cap spotting the coins that are doing well (big-cap), the promising coins (mid-cap) as well as the high risk ones (small-cap). You wouldn't want to build a boring portfolio, reasons why your portfolio should balance safety, growth, and a bit of fun speculation.
- Spotting momentum and managing risk: It is obvious that when a coin's market price starts rising, something is going on. Professionals see this as a signal to check trading volume and network activity to determine if it's just hype or genuine growth.
This gives them the opportunity to manage risk by combining insights like smoother trades, less price slippage, and lower chances of market manipulation to make profitable decisions in the crypto market.
Conclusion
Market capitalization is a great tool to set the atmosphere for your crypto decision making. It gives you a snapshot view of a crypto project's size and market presence.
Yes, just a snapshot, wouldn't it be better to make your crypto decision on clearer insights? You should consider pairing market cap with other important metrics like trading volume, network activity, and developer engagement with a heavy dose of critical thinking, you will be able to see a clearer picture of the crypto market and make your decisions with more confidence.
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