What is FDV (Fully Diluted Valuation) and how can it improve your investment decisions❔

Understanding FDV can help you avoid risky investments and identify potential opportunities in the crypto market. Let’s break it down in the simplest way possible.

What is FDV? (Fully Diluted Valuation)

Imagine you own a pizza shop. Right now, you’ve only made 2 pizzas, but you have enough ingredients to make 10 pizzas in total.

If each pizza sells for $10, then
→ The current value of your shop (based on the 2 pizzas made) = $20 (2 × $10).

→ But if you made all 10 pizzas and sold them for $10 each, your shop would be worth $100.

FDV works the same way in crypto. It represents the total value of a cryptocurrency if all its tokens were in circulation at the current price.

FDV = Current Token Price × Total Supply

→ Example
If a coin costs $1 and Total Supply is 1 billion coins then FDV = $1 billion ($1 × 1B)

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Now, let’s compare FDV vs. Market Cap

→ Market Cap is like the value of the currently available pizzas (tokens).

→ FDV is like the total value if all possible pizzas (tokens) were made and sold at today’s price.

What does it mean when FDV = Market Cap?

FDV = Market Cap means all tokens are already in circulation, and there are no locked or unreleased tokens left. This means:

→ No inflation risk (since no new tokens will be unlocked).

→  Price is based purely on supply and demand (not affected by future token unlocks).

→ Investors don’t have to worry about dilution (since sudden token releases won’t happen).

High FDV vs. Low FDV: What Do People Mean?

🔴 High FDV (RISK)

FDV is much higher than Market Cap = Many tokens are still locked, creating a risk of price drops when they unlock.

Example of High FDV Risk
→ A new token is priced at $1.
→ Total supply: 1 billion tokens.
→ Circulating supply: 100 million tokens.
→ Market Cap: $100 million (100M × $1).
→ FDV: $1 billion (1B × $1).

🚨 Warning: 90% of the tokens (900M) are still locked. When they unlock, early investors might sell, causing the price to crash.

🟢 Low FDV (🔥 Potential Opportunity!)

FDV is close to Market Cap = Most tokens are already circulating, meaning less inflation risk.

Example of Low FDV
→ A token is priced at $1.
→ Total supply: 1 billion tokens.
→ Circulating supply: 900 million tokens.
→ Market Cap: $900 million (900M × $1).
→ FDV: $1 billion.

✅ Good sign: Since only 100 million tokens are left to be released, the supply won’t increase much, reducing the risk of sudden price drops.

A Good Investment Scenario

→ Circulating supply is at least 70-80% of the total supply.
→ Token unlocks happen slowly over time instead of all at once.
→  The project has strong demand and real-world use cases to support price stability.

How to know if there are Locked Tokens?

→  Check Coin Tracking Websites
Go to @coingecko  or @CoinMarketCap and look for the token’s circulating supply and total supply. If circulating supply is much lower than total supply, many tokens are still locked.

In conclusion

→ High FDV = 🚨 Risky, could face sell pressure.
→ Low FDV = ✅ Potentially undervalued, less risk of inflation.

FDV isn’t the only thing to consider when investing, but it helps you avoid projects with high inflation risks. Always combine FDV analysis with tokenomics, demand, and upcoming unlocks before making investment decisions!

Is FDV = Market Cap Even Possible?

Yes, but it’s rare, especially for newer tokens. It usually occurs in these cases:

→ Mature Cryptos
Bitcoin ($BTC) is a great example. Since Bitcoin’s total supply is 21 million and all issued BTC exists in circulation, FDV is equal to Market Cap at any given time.

→ No Locked Tokens
Some projects launch with 100% of tokens immediately available, meaning FDV = Market Cap from Day 1. This is uncommon because most projects use vesting schedules to control inflation.

→ All Vesting/Unlocks are Complete
If a token started with locked allocations (for teams, investors, rewards) but all tokens have now been released, then FDV will equal Market Cap.

The potential downsides of FDV equaling Market Cap mainly affect the project owners. If the project still needs funding, it can’t rely on unlocking tokens to raise capital. Additionally, if the team or early investors already hold all their tokens, they might sell them, causing price fluctuations.