Market cap, explained
Market capitalisation, usually shortened to market cap, is the market's current price tag on the whole of something. The tables on the markets page are sorted by it, and the heat map can size tiles by it, so it is worth knowing exactly what it measures.
For a company
market cap = share price × number of shares
A company with 2 billion shares trading at $150 has a market cap of $300 billion. Market Check multiplies the latest price by the company's share count. Share counts are taken from Yahoo Finance and rechecked about once a week, so during the day a market cap moves exactly in line with the share price.
Market cap is not the same as what the company is "worth" in an accounting sense, and it is not what it would cost to buy the business outright: a buyer would usually pay a premium and take on the company's debts. It is simply the total value the stock market puts on the shares right now.
For a cryptocurrency
market cap = price × circulating supply
Circulating supply is the number of coins currently available to trade. Many projects also have coins that exist but are locked, or that will be created in future. Two other figures are often quoted:
- Total or maximum supply: every coin that exists or ever can.
- Fully diluted valuation (FDV): the price multiplied by that larger supply.
A big gap between market cap and FDV means a lot of new supply is still to come. If demand does not grow to match, that supply can weigh on the price as it is released. Market Check uses CoinGecko's circulating-supply market cap, the usual convention for ranking coins.
For a fund
A fund such as an ETF does not really have a market cap in the same sense, because new shares are created and redeemed as money flows in and out. The usual measure of a fund's size is its assets under management (AUM): the total value of what it holds. Market Check shows AUM as published by Nasdaq, rechecked about once a week and moved with the fund's price in between.
A low price is not "cheap"
The most common mistake is to compare share or coin prices directly. A coin priced at $0.0001 is not cheaper than one at $60,000 in any meaningful sense; it may simply have trillions more units. Likewise, a $40 stock is not cheaper than a $400 stock: it may have ten times as many shares and the same market cap.
A useful sanity check is to ask what market cap a price target implies. If a coin with 500 billion units in circulation "goes to $1", its market cap would be $500 billion, larger than most of the world's companies. Market cap turns a price into a number you can compare.
Size categories
For US stocks, people loosely talk about large caps (roughly $10 billion and up), mid caps and small caps (roughly $2 billion and below). The boundaries are conventions, not rules, and different index providers draw them differently. Larger companies tend to move less in percentage terms day to day, which is one reason a heat map sized by value usually looks calmer than one sized by move.
Limits of the number
- It is only as good as the share count or supply figure behind it, and those are updated less often than prices.
- For thinly traded assets, the last trade can be a poor guide to what the whole supply could actually be sold for.
- It says nothing about profits, debt or whether the price is reasonable.
Nothing here is financial advice. Details of every source are on the sources and methods page.
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