Price times quantity — a number that says how much the market currently believes something is worth in total, not how much cash actually changed hands to get there.
Market capitalisation is simple to calculate and easy to misread: multiply an asset’s current price by the number of units outstanding. For a company, that’s share price times shares outstanding. For a token or a whole asset class, it’s the same arithmetic applied to circulating supply.
The number is a mark-to-market snapshot, not a record of money actually invested — an asset’s market cap can move by billions on trading volume representing a tiny fraction of that figure, because the last trade’s price gets multiplied across every unit outstanding, most of which never traded at that price. Rolf Banz’s 1981 finding that smaller-market-cap stocks earned persistently higher risk-adjusted returns than large-cap stocks — the “size effect” — is part of why market cap became a standard variable in asset pricing research, not just a headline number.
Reading a sector’s market capitalisation chart without that caveat is exactly the reading that makes the number look more like invested value than it is — see Memecoin for why that gap matters most acutely.
Source: Banz, R.W. (1981), “The Relationship Between Return and Market Value of Common Stocks,” Journal of Financial Economics, 9(1), 3–18.