Market capitalisation is the most widely quoted number in crypto and one of the most widely misread. It is price multiplied by circulating supply. That is the whole calculation, and every limitation follows from how simple it is.
It is a ranking device
Used as intended, market cap answers one question well: how large is this asset relative to that one? Unit price cannot answer that, because a unit is an arbitrary slice. An asset trading at a few cents can be larger in total than one trading in the thousands, and comparing the two by unit price tells you nothing at all. Our guide to market capitalisation works through that comparison properly.
Where the misreading starts
The most common error is treating market cap as an amount of money that is somehow inside the asset and could be taken out. It is not. It is an arithmetic product, computed by taking the price of the most recently traded unit and applying it to every unit in existence — including the overwhelming majority that were not part of that trade and are not for sale.
Because of that, the amount of capital required to move a market cap by a given amount is far smaller than the change in the figure. A modest amount of buying against a thin book can add a large notional sum, and the same is true in reverse. The number moves faster than the money behind it.
The denominator is doing a lot of work
Circulating supply is not always a clean quantity. Units may be locked, reserved, unissued, or permanently lost, and different data providers make different judgements about which of those to count. Because the multiplier is applied to every unit, a disagreement about supply produces a proportional disagreement about the headline.
Diluted figures — which apply today’s price to a maximum future supply — are a different measure again, and answer a different question. Neither is wrong; using one while thinking about the other is.
What it cannot tell you
It cannot tell you whether an asset is cheap or expensive, because it contains no reference to anything the asset does. It cannot tell you whether the price could be realised at scale, because it assumes a depth of demand that has not been demonstrated. And it cannot tell you about concentration — an asset can have a substantial market cap while most of its supply sits in very few hands, which is a risk that the figure is structurally incapable of showing.
Using it well
Treat it as one axis among several. Read it alongside actual traded volume, alongside depth, and alongside whatever you can learn about how the supply is distributed. The markets page ranks by market cap because it is a reasonable default ordering, not because it is a verdict — and the compare tool exists so that two assets can be put side by side on more than one dimension.
For the wider context see market cap, volume and supply explained. Nothing here is financial advice.