Explainer: reading market capitalization and fully diluted valuation

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Market capitalization multiplies a token’s price by its circulating supply. It is the most common way to rank cryptocurrencies by size, but it can mislead when much of the supply is locked.

Fully diluted valuation multiplies the same price by the total or maximum supply. Comparing the two shows how much future supply could reach the market through a token unlock or ongoing issuance. A large gap is a reason to read the project’s tokenomics carefully.

Neither figure tells you how much money could be realised by selling. Thinly traded tokens have low liquidity, so even modest orders can move the price. Volatility, trading volume and the depth of the order book on major exchanges are better guides to how easily a position can be exited.

Analysts also watch market dominance — one asset’s share of total market value — to judge whether money is moving toward or away from the largest assets.