The Truth About FDV (Fully Diluted Market Capitalization) That Cryptocurrency Speculators Should Know

Does the token price reflect its true value?

When evaluating cryptocurrency projects, many investors only look at market capitalization. However, this is a pitfall. This is because it overlooks the existence of locked tokens that are not circulating in the market. The indicator that plays a crucial role here is FDV (Fully Diluted Valuation).

What is FDV——A numerical representation of future scenarios

FDV stands for Fully Diluted Valuation, which indicates the market capitalization assuming that all tokens of the project are currently supplied in the market.

The calculation method is simple:

FDV = Current Token Price × Max Supply

For example, if 1 Token is 5 dollars and the maximum supply is 100 million Tokens, then the FDV will be 500 million dollars. In other words, FDV is a number that “indicates the total value of the project when all Tokens are released in the future.”

Market Capitalization and FDV - What’s the Difference?

Understanding the differences between these two indicators greatly influences the accuracy of investment decisions.

Market capitalization is calculated based only on the amount of tokens currently available for trading in the market. For example, if there are 10 million tokens in circulation and 1 token is worth 5 dollars, the market capitalization would be 50 million dollars.

On the other hand, FDV takes into account all tokens that will be released in the future. If the maximum supply of the same project is 100 million Tokens, then the FDV will be 500 million dollars—10 times the market cap.

This large difference means that many tokens have not yet flowed into the market in the future. The timing and scale of the release of locked tokens will be extremely important information for investors.

Reasons Why FDV is Being Watched - Visualizing Future Risks

Locked tokens are gradually released to the market through staking rewards and the vesting schedule of team members. FDV serves as a clue to predict potential price pressure during this process.

From an investor's perspective, it is important to be cautious if the FDV significantly deviates from the current market valuation. If the FDV is excessively high compared to the actual project development status, there is a possibility that the price may drop significantly when the token is diluted.

Conversely, for projects with a solid technological foundation and growth plan, a high FDV is not necessarily a bad sign. What matters is whether the project's intrinsic value is commensurate with the FDV.

Important Considerations When Evaluating FDV

Token release schedule confirmation

The first point of verification is when and to what extent the locked tokens will flow into the market. If a large number of tokens are released in a short period, the risk of price decline increases due to supply pressure.

has growth potential

An ideal project generates enough demand to offset the impact of new token supply. In other words, it is necessary to simultaneously achieve the expansion of the user base, the enhancement of token utility, and the development of the ecosystem.

Project Foundation Assessment

If the team's execution ability, technical innovation, market competitiveness, and long-term growth strategy are robust, projects with a high FDV can still hold value. It is essential to evaluate not only the numbers but also the qualitative aspects of the entire project.

Limitations of FDV Indicator and Points to Note

FDV is not a perfect indicator. It assumes that “the price does not fluctuate when new tokens are released,” but the actual cryptocurrency market is extremely volatile.

Moreover, in the case of small projects or meme coins with a massive supply, the effectiveness of indicators such as market capitalization and FDV significantly decreases. In such cases, it is necessary to evaluate the intrinsic value of the project from a different perspective, rather than relying solely on these indicators.

Furthermore, it is important to recognize that in the long term, there is a high risk of price decline unless demand keeps up with the increase in Token supply.

Comprehensive Investment Decision

FDV is a useful analytical tool, but it should not be relied upon alone. Effective evaluation requires a combination of quantitative indicators such as market capitalization and FDV, along with qualitative factors like team quality, tokenomics design, technical competitiveness, and adoption status.

By comprehensively evaluating the project from multiple perspectives, it becomes possible to make reliable investment decisions for the first time.