Key takeaways
- A cryptocurrency's market capitalisation, or market cap, is the price of one unit multiplied by the number of units in circulation.
- A low price per unit doesn't make a cryptocurrency cheap. What matters is the total value, not the price of a single unit.
- Fully diluted value includes every unit that can ever exist. The gap between it and the market cap shows how much the supply can still grow.
- Market cap doesn't tell you how easy it is to sell, how much money has actually gone in, or who holds the units.
Contents
A cryptocurrency's market capitalisation is the price of one unit multiplied by the number of units in circulation. It tells you what all the units would be worth together, based on the latest price.
Market capitalisation, usually shortened to market cap, is the most common measure of a cryptocurrency's size. Price lists usually rank cryptocurrencies by it. But the number is often misunderstood, and it tells you less than many people think.
The formula
Market cap = price per unit × number of units in circulation
The same method is used for shares. A company's market cap on the Iceland stock exchange is its share price multiplied by the number of shares issued.
A worked example in krónur
Imagine a cryptocurrency we'll call Coin A:
- One unit costs ISK 200.
- 50 million units are in circulation.
The market cap is ISK 200 × 50,000,000 = ISK 10,000,000,000, or ISK 10 billion.
If the price rises to ISK 300, the market cap goes up to ISK 15 billion, even though the number of units is unchanged. If the price halves, so does the market cap.
Circulating supply and maximum supply
Two supply figures matter:
- Circulating supplyCirculating supplyHow many units of a cryptocurrency already exist and are in holders' hands, the figure used to calculate its market capitalisation. is the number of units that exist right now and can be traded.
- Maximum supplyMaximum supplyThe largest number of units of a cryptocurrency that can ever exist under its rules, such as 21 million for bitcoin. is the most units that can ever exist under the coin's rules.
For bitcoin, the maximum supply is 21 million. By October 2026, about 20.1 million had been issued. New bitcoin is still added through MiningMiningThe process in which computers compete to solve a puzzle so they can add the next block to the blockchain and earn new bitcoin and fees., but ever more slowly because of the halving.
Some cryptocurrencies have no maximum supply at all. EtherEther (ETH)The currency of the Ethereum network, used to pay network fees, as a stake under proof of stake and to send value between people., the coin of Ethereum, is one example. Others have a cap, but only a small share of it is in circulation so far. Their supply can grow a lot in the coming years.
Fully diluted value
Fully diluted value (FDV) is the price per unit multiplied by the maximum supply. It shows what the market cap would be if every unit were in circulation, at the same price.
Take Coin A again. Say its maximum supply is 200 million units, but only 50 million are in circulation:
| Calculation | Result | |
|---|---|---|
| Market cap | ISK 200 × 50 million | ISK 10 billion |
| Fully diluted value | ISK 200 × 200 million | ISK 40 billion |
So three quarters of the units have not been released yet. When they are, for example when founders or early investors receive their share, the supply grows. If demand doesn't grow at the same pace, the price per unit can fall. This is called dilution.
For bitcoin, the two figures are close, because more than 95% of all bitcoin that will ever exist is already in circulation.
A low price doesn't mean a coin is cheap
A common misconception is that a coin costing a fraction of a króna is cheap and has more room to grow than one costing millions. The price of a single unit says almost nothing on its own.
Think of a birthday cake. Whether you cut it into 8 or 80 slices makes no difference to the size of the cake. The slices just get smaller.
Compare two coins:
- Coin A costs ISK 200, with 50 million units in circulation. Market cap: ISK 10 billion.
- Coin B costs ISK 0.01, with 5,000 billion units in circulation. Market cap: ISK 50 billion.
Coin B costs just one hundredth of a króna, yet its total value is five times that of Coin A. For Coin B's price to double, its market cap would have to reach ISK 100 billion. To reach ISK 1 per unit, it would have to grow a hundredfold.
You can see this in the real world too. Some memecoinsMemecoinA cryptocurrency born from an internet joke or meme, usually with little or no practical use, whose price rests almost entirely on hype., such as Shiba InuShiba Inu (SHIB)A memecoin token on the Ethereum network from 2020, named after the same dog breed that features in Dogecoin's logo., have hundreds of trillions of units in circulation. That is why each unit costs only a tiny fraction of a króna. In the other direction, one bitcoin costs millions of krónur, but one Satoshi (sats)Satoshi (sats)The smallest unit of bitcoin: one satoshi is one hundred-millionth of a bitcoin, or 0.00000001 BTC., a hundred-millionth of a bitcoin, costs only a fraction of a króna.
What market cap doesn't tell you
Market cap is useful for comparing the size of cryptocurrencies. But it has limits:
- It doesn't tell you how easy it is to sell. Market cap is based on the latest price. If many people try to sell at once, the price can drop fast. What matters is how much is actually bought and sold, the trading volumeTrading volumeThe total value of all trades in a particular coin over a set period, usually the last 24 hours., and how much LiquidityLiquidityHow easily an asset can be bought or sold quickly at a fair price, without the trade moving the price much. there is in the market.
- A few trades can set the number. Say a coin has a billion units and someone buys a handful at ISK 10. The market cap is now ISK 10 billion, even if only a few thousand krónur changed hands. This is common with small and new coins.
- It isn't the same as money invested. If a market cap rises by a billion, that doesn't mean a billion krónur went into the coin. The price of a few units is used to value all the others.
- It doesn't tell you who holds the units. With some coins, the founders or a few large holders, often called whalesWhaleSomeone who holds so much of a particular coin that their buying or selling can move the price., own a big share. If they sell, the price can collapse.
- Lost units are still counted. A significant amount of bitcoin is thought to be lost for good, for example because of lost keys. Nobody knows exactly how much, but the market cap still counts it.
- It says nothing about quality. A high market cap doesn't mean a project is sound, and a low one doesn't mean a coin is undervalued.
How is market cap useful?
- To compare size. Bitcoin is the largest cryptocurrency by market cap. In October 2026, bitcoin's market cap was just over half that of the entire crypto market.
- To gauge risk. Smaller cryptocurrencies usually swing more, because less money is needed to move the price. Read more about why crypto prices are so volatile.
- To put promises in context. If someone says a coin will rise a hundredfold, work out what its market cap would then be. The figure often turns out to be unrealistic. Promises like that are also common in crypto scams.
Frequently asked questions
What is the difference between market cap and trading volume?
Market cap is the total value of all units in circulation at the latest price. Trading volume is how much was bought and sold over a given period, often the last 24 hours. A high market cap with low trading volume can be a sign of poor liquidity.
Does a stablecoin's market cap change?
A StablecoinStablecoinA cryptocurrency designed to keep a steady price, usually by tracking the US dollar or another currency. is designed to stay close to the value of the currency it tracks, for example one US dollar. So its market cap changes mainly when new units are issued or old ones redeemed.
Is a coin with a low market cap more likely to rise?
Not necessarily. A small coin needs less money to rise, but it can also fall faster and disappear completely. Many small cryptocurrencies have become worthless.
Closing thoughts
Market cap is the price of one unit multiplied by the number of units in circulation. It is a better measure of a cryptocurrency's size than the price of a single unit.
Use market cap as a starting point, not the final answer. Look at the supply, the trading volume and who holds the units too, and always keep the risks in mind.
