Fully Diluted Valuation (FDV) is one of the most overlooked yet important figures in crypto investing. While many focus only on the current price or market cap of a token, FDV shows the value of a project if all of its tokens were in circulation. This number can uncover risks and offer clarity that the headline figures don’t provide. Understanding FDV helps investors make better choices, especially in a market where early promises don’t always match long-term outcomes.
Why Market Cap Alone Can Be Misleading
Market cap is commonly used to judge the size and value of a crypto project. It’s calculated by multiplying the current price of a token by the number of tokens currently in circulation. This seems simple, but it only tells part of the story. Many projects release tokens slowly over time, meaning only a small share may be circulating. This can create the illusion of a small, undervalued project when in fact the full supply tells a much different story.
Understanding Token Supply Categories
To get the full picture, it’s important to understand how token supply is measured. Circulating supply is the amount of tokens actively traded in the market. Total supply includes all tokens that have been created, even if they’re not yet in use. Maximum supply is the limit of how many tokens will ever exist. FDV is calculated by multiplying the current price by the maximum supply. This shows what the project would be worth if every token were unlocked and tradable, offering a more realistic sense of long-term valuation.
How Vesting Schedules Affect Future Prices
Many crypto teams lock up a large portion of tokens for developers, advisors, or early investors. These tokens are released gradually through what’s known as a vesting schedule. As these tokens become available, they increase the circulating supply, which can put pressure on the token’s price. If investors don’t pay attention to when these tokens are set to be released, they could be caught off guard by sudden changes in price or selling volume.
Team Allocations and Insider Holdings Matter
Projects often reserve a portion of tokens for the founding team and early backers. These insider holdings might be locked up early on, but once released, they can flood the market if sold. If a large part of the total supply belongs to a small group, it raises questions about long-term fairness and control. Investors should always check how much of the token supply is controlled by insiders and how those tokens are scheduled for release.
Staking Rewards Can Lead to Quiet Dilution
Many crypto tokens offer staking rewards or yield farming to encourage users to lock up their coins. While this sounds appealing, these rewards usually come from newly created tokens, which slowly increase the total supply. Over time, this leads to dilution, even if it happens gradually. The extra supply can affect token value, especially when more people choose to sell their rewards rather than hold them. It’s important to weigh these reward systems against the long-term impact on FDV.
Different Launch Models Have Different Effects
How a token is launched also affects its long-term valuation. Some tokens are released through public sales, where early investors buy in at lower prices. Others are launched fairly with no pre-sale or private allocations. Public sales often lead to large unlocks later on, while fair launches may avoid this problem. Each method affects FDV differently, and investors should look closely at how tokens were originally distributed to understand the risk of future dilution.
Ongoing Inflation Changes the FDV Equation
Not every token has a fixed supply. Some projects are designed to issue new tokens over time, either to support the network or reward users. This kind of inflation adds complexity to FDV because the maximum supply isn’t always fixed. Investors need to check whether a token has a clear limit or if more coins will continue to be created. A growing supply means that today’s FDV might not reflect the situation in the future. Many crypto exchanges provide tokenomics data, but it’s still important to verify the supply structure directly from the project’s documentation.
Why FDV Helps You Compare Projects More Fairly
FDV is a useful tool when comparing different crypto projects. Two tokens might have similar market caps, but one may have most of its supply already in circulation, while the other has large future unlocks ahead. Without looking at FDV, it’s easy to misjudge the risk and true value. FDV gives a more balanced view, especially when trying to decide between projects that are still early in their release schedules. Having access to accurate FDV figures on crypto exchanges also helps investors make fairer comparisons without relying on incomplete data.
Conclusion
Fully Diluted Valuation is more than just another number, it’s a look at the bigger picture. By understanding how much supply is still locked up, when it’s due to be released, and how that might affect value, investors can avoid common mistakes. Relying on market cap alone leaves out key information that FDV brings to light. Taking the time to understand token supply, team holdings, staking rewards, and inflation helps build stronger, more informed decisions. In a fast-moving market, the projects that seem undervalued today may look very different once FDV is taken into account.