What is market capitalization?

How do you calculate market capitalization?

The SEC's Investor.gov defines a company's market capitalization as the current public market price of one share multiplied by the total number of outstanding shares. That is the whole formula:

Market cap = share price × shares outstanding

The result is the value the stock market puts on the whole company's equity at that moment. It changes every time the share price changes, which during trading hours can be many times a minute.

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

Fund managers and index providers group companies by size because size tends to come with different behavior. FINRA's bands, shown in the box above, run from micro-caps under $250 million to mega-caps of $200 billion and more. Other organizations may draw the lines in different places, so treat them as conventions, not laws.

Some stock indexes weight their members by market cap, so the biggest companies move those indexes most; the SEC notes that weighting choices can make similar-sounding indexes perform very differently. If you own an index fund or ETF, check how it weights its holdings.

How is crypto market cap calculated — and why can it mislead?

Crypto data sites use the same idea: token price × supply. The ECB points out that "supply" can mean several things — circulating supply, total supply or maximum supply — and each gives a different market cap for the same token. Some sites also show a fully diluted valuation, which uses the maximum supply that will ever exist. For bitcoin, the project's own FAQ states that only 21 million coins will ever be created.

The ECB lists further reasons to treat crypto market caps with care:

• It is not money invested. Multiplying today's price by all coins does not mean that much money went in or could come out.
• Lost and stolen coins still count in supply figures even if nobody can use them.
• Prices differ across platforms, data aggregators make different choices, and wash trading can distort prices.

How big did the crypto market get?

The Financial Stability Board, which coordinates financial regulators across major economies, estimated that unbacked crypto-asset market capitalization reached about $2.6 trillion in November 2021, roughly 3.5 times its level at the start of that year. Even at that peak it was around 1% of global financial assets. The FSB also found ownership highly concentrated, with the largest 1,000 investors holding about 3 million bitcoin.

Because market cap moves with price, these totals can multiply or shrink sharply within a year — the FSB figure above was 3.5 times its level of just eleven months earlier. That is why this page avoids quoting a current figure: any number would be out of date within days. The swings themselves are covered in bull vs bear markets.

What mistakes do people make with market cap?

• Thinking a cheap price means room to grow. A token at $0.01 with hundreds of billions of units can already have a huge market cap. Always multiply by supply.
• Comparing circulating cap with fully diluted cap. Check which supply figure each source uses before comparing two assets.
• Treating market cap as cash in the system. In thin markets, selling even a small share of supply could move the price a lot.
• Equating size with safety. Large companies tend to be steadier, FINRA says, but they still fall in market-wide declines, and crypto rankings by market cap say nothing about a project's soundness.
• Ignoring the date. Market caps change by the minute; a figure without a timestamp is not useful.