What is market capitalisation?

How do regulators define market capitalisation?

The US Securities and Exchange Commission’s investor site, Investor.gov, defines market capitalisation as “the value of a corporation determined by multiplying the current public market price of one share of the corporation by the number of total outstanding shares.”

The Financial Industry Regulatory Authority (FINRA), which oversees US brokers, puts it more simply: “Market capitalization, or market cap, is one measurement of a company’s size.” Both definitions describe the same formula:

Market cap = current price per share × number of shares outstanding

The price is the current market price — so market cap changes every time the price changes.

How do you calculate market cap for a company?

FINRA gives this example: “For example, if a company has 5 million shares outstanding and its current stock price is $20, it has a market capitalization of $100 million.”

Worked through, with a second step of our own (illustrative):

A 10% fall in the price produced a 10% fall in market cap, because nothing else in the formula moved. The company did not lose $10 million in cash; the market simply valued each share at less.

Does a higher share price mean a bigger company?

No. FINRA compares two companies whose shares both trade at $50. Company A has 5 million shares, so its market cap is $250 million. Company B has 5 billion shares, so its market cap is $250 billion — a thousand times larger at the same price. FINRA’s conclusion is that the number of shares outstanding matters most when judging size, not the price of one share.

The same trap exists in crypto. A coin priced at a fraction of a cent is not automatically “cheap”, and a coin priced in thousands is not automatically “big”. Without the number of units, a price on its own tells you very little.

What do large-cap, mid-cap and small-cap mean?

Investors often group companies by market cap. FINRA introduces its bands with a warning — “The delineation between each group can vary” — and then lists them as:

These are conventions, not legal categories. Investor.gov, for instance, says companies below “$250 or $300 million” are often called microcap stocks, and those under $50 million are sometimes called “nanocap”. FINRA adds that mid-cap companies are generally less susceptible to volatility than small-cap ones — a general tendency, not a promise about any one company.

How is crypto market cap calculated?

We found no regulator definition of crypto market cap. The figures you see on price websites come from data providers, which publish their own methods. Two such providers publish the same basic formula:

• CoinMarketCap multiplies a reference price by the circulating supply, and ranks coins by that number.
• CoinGecko multiplies the current price in US dollars by the circulating supply.

So crypto market cap follows the same idea as the Investor.gov definition — a price times a count of units — but the count is “circulating supply” rather than shares outstanding. That count is where the differences start.

What is the difference between circulating, total and max supply?

CoinMarketCap’s methodology uses three supply figures:

• Circulating supply: “the best approximation of the number of assets that are circulating in the market and in the general public’s hands.” Tokens locked by contracts, held by the team, foundation or treasury, or allocated to private investors are generally not counted.
• Total supply: “the total amount of coins in existence right now, minus any coins that have been verifiably burned.”
• Max supply: “The best approximation of the maximum amount of coins that will exist in the forthcoming lifespan of the cryptocurrency, minus any coins that have been verifiably burned.”

Note the words “best approximation”. CoinMarketCap says its own calculation “may differ from the project teams”, while CoinGecko says it obtains circulating supply from token teams and then verifies it. Two reputable sites can therefore show different market caps for the same coin at the same price.

For Bitcoin, the max supply comes from the software’s issuance schedule: just under 21 million BTC, as explained in our guide to what Bitcoin is.

What is fully diluted valuation (FDV)?

CoinMarketCap defines fully diluted valuation as max supply × price. It answers one narrow question: what would the market cap be if every coin that can ever exist were already in circulation, at today’s price?

An illustrative token, using made-up numbers:

Only 25% of this token’s max supply circulates, so its FDV is four times its market cap. When locked tokens are released, market cap can rise even if the price does not move. This is arithmetic, not a forecast of what the price will do.

What does market cap not tell you?

FINRA warns that market cap is the “perceived” value of a company because the stock price is set by investors: “It isn’t necessarily the actual value of a company and all of its parts.” Keep three limits in mind:

• It is not money invested. The formula multiplies today’s price by every unit. Nothing in it counts how much money people actually paid in.
• It moves with the price. Because price is one of only two inputs, market cap is as volatile as the price itself. Our guide to crypto volatility shows how large those moves can be.
• For crypto, the unit count is an estimate. Different methods give different circulating supplies.

What are the risks of relying on market cap?

Market cap is a description of size, not a measure of safety. A large market cap can still fall sharply: the UK Financial Conduct Authority (FCA) reports that Bitcoin fell from £93,947 on 6 October 2025 to £65,350 on 1 December 2025 — a drop of 30.44% in under two months. Since market cap is price × units, a price fall of that size pulls market cap down with it.

Small market caps carry their own problems. FINRA warns that social media posts can be used to spread false or misleading information to manipulate a stock’s price, with real consequences for companies, “particularly small or micro-cap companies”. In crypto, a high FDV relative to market cap tells you a large share of tokens is not yet circulating — check the project’s own release schedule rather than trusting a headline number. Our crypto risks guide covers the wider picture.

Blockhorizon is an education site. Nothing here is a recommendation to buy, sell or hold any asset.