Market Capitalization
Definition
The total market value of a company's outstanding shares, calculated by multiplying the current stock price by the total number of shares. Used to classify companies as large-cap, mid-cap, or small-cap.
Market capitalization (market cap) is the simplest measure of a company's total value in the stock market. If a company has 1 billion shares outstanding and each trades at $50, its market cap is $50 billion. It represents what the market collectively believes the entire company is worth.
Companies are categorized by market cap: large-cap ($10B+, often $200B+), mid-cap ($2B-$10B), small-cap ($300M-$2B), and micro-cap (under $300M). In crypto, similar classifications exist but with much smaller thresholds. These categories matter because they correlate with risk, volatility, and growth potential.
Large-cap companies (Apple, Microsoft, Amazon) are generally more stable, widely covered by analysts, and have more predictable earnings. Small-cap companies offer higher growth potential but with more volatility, less liquidity, and greater risk. A diversified portfolio typically includes exposure across market cap sizes.
Market cap is also used as an index weighting mechanism. The S&P 500 is market-cap weighted, meaning larger companies like Apple and Microsoft have a much bigger impact on the index's performance than smaller components. This is why a handful of mega-cap tech stocks can significantly influence index returns.
In cryptocurrency, market cap helps compare tokens. Bitcoin's market cap exceeding $1 trillion dwarfs most altcoins. However, crypto market cap can be misleading due to lost coins, locked tokens, and low-liquidity tokens where the market cap overstates realizable value.
Where this appears in Clarity
Clarity automatically tracks and calculates these concepts across your connected accounts.
Related Terms
Frequently Asked Questions
Is market cap the same as a company's value?
Market cap represents equity value — what the market values the company's shares at. Enterprise value (EV) is a more comprehensive measure that adds debt and subtracts cash. For comparing companies with different capital structures, EV is often more useful.
Why is crypto market cap sometimes misleading?
Crypto market cap multiplies the current price by total supply, but many tokens are locked, lost, or held by the team. 'Fully diluted market cap' includes all possible future tokens, which can be much higher than current market cap. Circulating supply market cap is more meaningful.