Market Cap, Volume and Bitcoin Dominance: Reading the Numbers

Open any crypto price page and the same handful of numbers greets you. They are genuinely useful once you know what they measure, and genuinely misleading if you assume they mean what the equivalent numbers mean in traditional finance.

Market capitalisation is the current price multiplied by the circulating supply. Its real job is comparison: it tells you that a coin priced at a fraction of a unit is not cheap, because it may have a hundred times more coins in existence. The most expensive mistake a beginner makes is buying a token because the unit price looks small. Unit price is meaningless on its own; only market cap makes two assets comparable.

What market cap is not is money invested. If a thinly traded coin's last trade was at two units, every coin in existence is valued at two units, even though selling them all would crash the price long before you finished. Market cap is an accounting convention applied to the last trade, nothing more.

Fully diluted valuation applies the same maths to the maximum supply that will ever exist rather than the amount circulating today. The gap between the two tells you how much future supply is queued up. A project whose fully diluted value is five times its market cap has a lot of tokens due to be released, and those releases usually create sellers.

Twenty-four-hour volume measures how much changed hands. High volume relative to market cap means you can probably enter and exit without moving the price much. Very low volume means you are in an illiquid asset regardless of how impressive the market cap looks. Be sceptical of aggregate volume figures too: some venues have historically reported inflated numbers, so check the volume on exchanges you would actually use.

Bitcoin dominance is Bitcoin's share of the total crypto market cap. Traders use it as a rough gauge of risk appetite — falling dominance often means money is rotating into altcoins, rising dominance often means people are retreating to the largest asset. It is a blunt instrument and has been distorted by the growth of stablecoins, which now make up a substantial chunk of the total and are not a bet on anything rising.

Two more numbers are worth a glance. Total value locked measures assets deposited in DeFi protocols, useful for tracking activity but inflated whenever the price of the deposited assets rises. And realised capitalisation values each coin at the price it last moved, which is a slower and often more honest measure of money actually committed.

Use these numbers as context rather than as signals. They tell you the size, liquidity and shape of what you are looking at. They will not tell you whether it is worth owning — that still requires looking at what the thing actually does.