Market capitalization (market cap) is the most common metric for the total value of a cryptocurrency, calculated as the current price per token multiplied by the number of tokens currently in circulation. It is the closest equivalent to a company's equity market value in traditional finance, though the comparison has important limits in the context of meme coins with no revenue or underlying assets.
Circulating supply vs. fully diluted valuation
Market cap typically refers to the circulating supply — tokens that are currently tradeable on the open market. Fully diluted valuation (FDV) is the price if all possible tokens (including locked, vested, or not-yet-minted tokens) were in circulation. For tokens with large unlock schedules, FDV can be dramatically higher than market cap, which is important for assessing inflation risk.
Market cap as a guide to potential
Traders use market cap to contextualize potential upside. Comparing a token's current market cap to "comparable" tokens gives a rough sense of whether the current valuation is low, fair, or extended. "This is at a $5M market cap and WIF was at $5M before going to $5B" is a common framing — though it glosses over the question of whether this token has any reason to follow WIF's path.
Why market cap is misleading for meme coins
Market cap calculations assume all tokens could be sold at the current price, which is not true for illiquid tokens. A meme coin with 1 trillion total supply at a price of $0.0000001 might show a $100M market cap, but the actual liquidity might be $50,000 — selling even a fraction of that supply would collapse the price. Always check the actual liquidity depth alongside market cap.