#MarketIndicator Understanding Market cap and Fully diluted market cap with examples of
#Orca and
#Pepe .
For the sake of size and importance of any
#Crypto , we tend to look at Market capitalization but it happens to be two kinds: Market cap and Fully diluted market cap. What are these ? Let's understand 👇
The market cap (market capitalization) and fully diluted market cap are key metrics used to evaluate the size and value of cryptocurrencies or other investments, but they represent different things:
-Market Cap
Definition: The total value of the circulating supply of a cryptocurrency.
Formula:
Market Cap = Circulating Supply × Current Price
Use: Gives a quick snapshot of a cryptocurrency's size and relative importance in the market.
-Fully Diluted Market Cap
Definition: The total value of a cryptocurrency if all potential coins or tokens were in circulation.
Formula:
Fully Diluted Market Cap = Max Supply × Current Price
Use: Helps assess the potential future valuation and the effects of token inflation.
*Example
Imagine a cryptocurrency with the following:
Circulating Supply: 10 million tokens
Maximum Supply: 20 million tokens
Current Price: $2
Market Cap = 10M × $2 = $20M
Fully Diluted Market Cap = 20M × $2 = $40M
In this case, the fully diluted market cap is double the market cap, signaling potential inflation risk as more tokens are issued.
*Real life example: The photo was taken from
$ORCA as an Example. This token has different value of Market cap and Fully diluted market cap because the total(max) supply of the token has not been circulated in he market .
Now, The value of the Market cap and Fully diluted market cap tend to be equal in the condition where there is total(max) supply of the token has been circulated in the market.
*Real life example: Let's look at
$PEPE . Here both the Market cap and the Fully diluted market cap are of same value at $8.97B.