Module 7 · The Rest of Crypto / 7.2
Price, supply, and the buyers on the other side.
A tiny price can hide a large valuation.
Imagine two fictional tokens on a screen. One costs $2. The other costs 20 cents.
The second looks cheaper. Then you notice there are ten times as many units of it.
A price tells you what one unit is quoted at. Before deciding what that means, you need to know how many units there are—and whether anyone will buy the amount you want to sell.
Put the two numbers together.
In our example, the $2 token has 100 circulating units. The 20-cent token has 1,000. Multiply price by circulating supply and both have a market capitalization of $200.
Market cap is the quoted value of the circulating supply at the reference price. It is not the amount people invested, cash in a vault, or the value of a company that token holders necessarily own.
The price per unit is still useful when placing a trade. It simply cannot tell you by itself whether a token is cheap, expensive, or likely to rise. Comparing market caps gives context, not an answer about fair value.
Both have a $200 market cap. The small symbols illustrate unit sizes, not the full supply.
A quote is not a promise to buy everything.
Now imagine the last trade was at $10. You own ten units, so your screen shows $100.
But the current buyers are willing to buy only two units at $10, three at $9, and five at $8. If you sell all ten into those offers, you receive $87 before fees. You cannot sell every unit at the first price.
That available capacity to trade without a large price change is liquidity. An order book shows offers at different prices. An automated market maker uses pool reserves and a pricing rule instead. In either case, a large trade can move its own price. That movement is price impact.
Available offers can disappear, pool balances can change, and your actual execution can differ from an earlier quote. Reported trading volume measures past turnover, not buyers waiting for your next sale.
Each blue circle is one unit sold into the shown offers. Larger orders reach lower bids.
Look at what could become sellable.
Circulating supply tries to describe units available in the market. Fully diluted valuation, or FDV, uses the current price with a broader supply figure, often total or maximum supply. Check the data provider’s definition.
If a fictional token has 100 circulating units, a stated maximum of 500, and a $2 price, its market cap is $200 and its FDV is $1,000. That calculation holds the price still. It does not predict what the other 400 units will sell for.
Vesting makes tokens available over time. An unlock can let a holder sell; it does not prove they will. Read when units become available, who receives them, and whether supply or the schedule can change.
A few large holders can influence selling or governance. A wallet address might also hold assets for many customers. Concentration deserves investigation, rather than an automatic accusation.
Each circle represents 50 fictional units. The unfilled portion is not yet circulating.
Check the measurement, too.
A tiny trade in a thin market can establish a quote that makes a huge supply look valuable. A supply number can be incomplete or disputed. Read the methodology and compare independent evidence.
Minting more units does not mechanically create wealth. If units increase while the price falls in proportion, market cap stays the same. If demand changes too, the result can differ.
Use the numbers together: price, circulating supply, future supply, holder control, trading depth and fees. None can certify that a token is useful or that you will be able to exit later.
The idea to keep
Market cap puts a unit price in context. Liquidity tests what a trade might actually receive. FDV and unlocks reveal supply questions that today’s circulating figure can hide.
A number on a screen is an input to a decision, not a withdrawal guarantee.