How it works
It is a useful scale indicator but does not represent cash invested in the asset or the amount that could be withdrawn at the current quoted price.
What to check
Check how circulating supply is defined and where the price comes from. Thinly traded assets can show large market caps based on a small amount of actual liquidity.
- Verify circulating supply
- Check liquidity
- Do not equate market cap with money invested
Limits and risks
Market cap can create false precision when supply data is uncertain or liquidity is low. It should be used with volume, ownership and issuance information.
Primary sources
Bitcoin Developer Reference↗Ethereum developer documentation↗FATF: Virtual Assets↗General information only. Investment products can lose value, and terms, fees and regulation can change.