Free Float Market Capitalization represents the market value of a cryptocurrency's publicly tradable tokens. It is calculated by multiplying the current price per token by the Adjusted Free Float Supply. This supply excludes tokens that are locked, reserved, or held for long-term purposes.
This metric accurately reflects market value by considering only the actively traded and publicly accessible tokens. It distinguishes itself from the total market capitalization, which includes all outstanding tokens regardless of their liquidity.
Free Float Market Capitalization is crucial for assessing a cryptocurrency's true liquidity and market dynamics. By focusing solely on the tokens available for public trading, it offers investors and traders a clearer picture of the asset's market behavior and investment potential.
This distinction is particularly important in cryptocurrency markets where project teams, foundations, or other strategic entities often hold a significant portion of the supply. These holders can influence the asset's volatility and trading volume.
The free float market cap is calculated using the following formula:
Free Float Market Capitalization = Token Price × (Total Supply – Locked Tokens)
Free Float Market Capitalization is inversely related to market volatility. A higher free float implies a larger number of tokens available for trading, generally leading to lower volatility as large trades do not significantly impact the token price. Conversely, a lower free float means fewer tokens are available, making the asset more susceptible to price manipulation and higher volatility.