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- Market capitalisation – or market cap for short – is defined as the total value of an asset currently in circulation. To calculate the market cap of a publicly traded company, for example, you multiply the current share price by the total number of shares outstanding.
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- The definition of a fully diluted market capitalisation is the total value of the crypto at today’s price if the entire future supply of coins were in circulation. Let’s take bitcoin (BTC) as an example.
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- Each time a bitcoin block is successfully mined, new coins are minted. At the time of writing, the number of bitcoins already mined and thus in circulation was approaching 18.8 million (as of 26 August 2021). The source code of bitcoin stipulates that the maximum number of coins that can ever be created will be capped at 21 million. In the case of bitcoin, the difference between market cap and fully diluted market cap is illustrated below.
- Market cap = 18.8 million x current price of 1 BTC
- Fully diluted market cap = 21 million x current price of 1 BTC
- Market cap and fully diluted market cap in crypto are often used to rank the relative popularity and importance to the overall market of particular coins, in much the same way as it is used to rank publicly traded companies.