Explanation
It is not the amount invested in the coin. In thin markets a small purchase can lift the price, and therefore the whole market cap, substantially.
01
How it is calculated
Market capitalisation is the last price times the number of coins in circulation. It is a handy metric to compare projects, but not a sum of money sitting anywhere: if everyone tried to sell at once, the price would come out far lower. Market cap measures valuation, not cash flow or money invested.
02
Where it misleads
A project can be 'worth' a billion while barely any coins are freely tradable: the rest is locked with the team or investors. So always check the free float, the gap with fully diluted valuation and daily volume. A high market cap with low volume is a warning sign.
Key takeaways
- Price × supply, not 'money invested'.
- Compare with free float and volume.
- High cap, low volume = caution.